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COLLEGE AND UNIVERSITY 
FINANCE 



By 

TREVOR ARNETT 



NEW YORK 

GENERAL EDUCATION BOARD 

61 BROADWAY 

1922 






Copyright 1922 By 
The General Education Board 



MAY - 1 1922 
©CU659879 



PREFACE 

The general purpose in writing this book has been to 
Kghten the tasks of college administrators and to help make 
their work more satisfactory, both to themselves and to all 
those who have at heart the welfare of American colleges. 
The particular purpose in writing it, in response to numer- 
ous requests, has been to put into book form a statement of 
the principles underlying college accounting and the use 
and care of trust funds, and to describe a complete, yet 
simple, system of college accounts which has been tried and 
found satisfactory. It is hoped that business officers will 
find the book a help to them in performing their duties more 
intelligently and efficiently, and that presidents, as well as 
trustees, will be assisted in discharging their responsibilities. 
No attempt has been made to discuss educational problems, 
the text being limited to a discussion of business and financial 
problems only. 

Chapters i to vi are devoted to a discussion of the prin- 
ciples underlying college organization and management and 
the problems of financial policy peculiar to the endowed 
college, particular emphasis being placed upon the principles 
which must be observed in accounting for trust funds and in 
maintaining them inviolate. 

The remaining chapters deal with the principles, methods, 
and plans to be followed in recording, accounting, and report- 
ing the financial transactions of colleges from the point of 
view of good practice, and are designed to help officials and 
employees who carry these responsibilities. In order to 



VI PREFACE 

render this portion of the book more effective an annual 
financial report of a supposititious college is included and 
explained at some length. 

In addition to requests which have been received for 
information concerning a proper financial system, the officers 
of the General Education Board have been frequently 
asked to furnish college trustees with a suitable set of by-laws. 
To supply this demand a set of by-laws containing pro- 
visions for the conduct of an endowed college has been 
drafted and included. 

Mention is made of the books of account and records 
needed, but detailed forms and headings have been stu- 
diously avoided. The principles and theory of college 
accounting, however, have been emphasized with the hope 
that officials in charge of this work will be stimulated to 
arrive at solutions best adapted to their own peculiar 
problems. 

I wish to record my sincere appreciation of the many 

helpful suggestions which have been made by my associates, 

and especially to acknowledge the aid given by Mr. N. C. 

Phmpton, Assistant Auditor of the University of Chicago, 

and Dr. J. Spencer Dickerson, Secretary of the Board of 

Trustees of the University of Chicago, my colleagues for 

many years, and by Dr. Wallace Buttrick, Dr. Abraham 

Flexner, and Mr. H. J. Thorkelson, my associates in the 

General Education Board. 

Trevor Arnett 
New York 
January 31, 1922 



TABLE OF CONTENTS 

CHAPTER PAGE 

I. Origin and Support of Colleges and Univer- 
sities 1-9 

II. Receipts 10-17 

Sources 10 

Student Fees 10-13 

Advance Payment of Fees . . . . . 13-14 

Income on Endowment 14-15 

Gifts 15-17 

III. Disbursements 18-23 

Expenses of Operation 19-21 

Disbursements of Auxiliary Departments . . 21-22 
Disbursements for Dormitories, Dining-Halls, 

Bookstores, etc 22 

Expenditures Incurred in Raising Funds . . 22-23 



Y) Endowment . . 24-53 

Definition 24 

Improper Use of the Term "Endowment" . . 24-26 

Source of Endowment 26-27 

Unrestricted and Restricted Endowment . . 27-28 
Gifts of Property and Securities to Be Entered at 

Actual Value 29-30 

Book Value of Endowment Assets Should Not Be 

Changed to Record Estimated Values . . 30-31 

Principles of Investment 32 

Suitable Kinds of Investments .... 32-34 

Diversification of Investments .... 34-35 
Investments Purchased Should Be Entered on the 

Books at Cost 35-37 

Funds Invested Separately or as a Whole . . 37-39 

vii 



viii CONTENTS 

CHAPTER PAGE 

Constant Care Required 39-41 

Reports to Trustees on Condition of Secur- 
ities 41-42 

Endowment Funds Should Not Be Loaned to 

Trustees and Officers 42-43 

Undesirability of Investing Endowment in College 

Buildings and Land 43-46 

Hypothecation of Endowment Investments . 46-47 

Floating Debt 47-49 

Use of Endowment Cash for Current Expenses . 49-50 

Funds Subject to Annuity 50-51 

Treatment of Pledges 51 

Procedure to Be Observed in Making Invest- 
ments 51-52 

Custody of Securities 52-53 

V. Physical Plant 54-57 

Definition 54 

Plant to Be Carried at Cost . . . . . 55-56 

Insurable Value 56 

Depreciation 56-57 

VI. Accounting 58-95 

Accounting for Funds 58-60 

Record of Funds 60-61 

Funds for Special Purposes 61-63 

Accounting for Plant ...... 63-64 

Accounting for Buildings in Course of Construc- 
tion 64-66 

Accounting for Current Operations . . . 66-67 

The Budget 67-89 

Budget Income 68-70 

How Estimates of Income Should Be Made . 70 

Student Fees 70 

Income from Endowments 70-73 

Estimated Income from Gifts .... 73-74 

Estimates of Income from Miscellaneous Sources 74-75 



CONTENTS 



IX 



CHAPTER 



Comparison of Estimated Income with Income 
Received Previously .... 

Budget Appropriations .... 

Budget Estimates for the Year — Summary 

Method of Budget Accounting and Control 

Budget Revision 

Closing the Budget 

Accounting for Auxiliary Departments 

Accoimting for Dining-Halls, Dormitories, etc. 

Accounting for Sundry Receipts and Disburse 
ments of a General Nature 

Balancing and Closing the Ledgers 

Purchasing .... 

VII. Account Books and Records . 
Cash Books .... 

Ledgers 

Voucher Register 
Pay-Roil Register 
Student Accounts 
Loose-Leaf and Boimd Books 
Statistical Records . 



VIII. Financial Reports . 

Annual 

Contents of Annual Reports . 
I. Survey of Results 
11. The Balance Sheet 

III. Current Operations 

IV. Gifts .... 
V. Explanatory Statements and Statistics 

For Trustees and Officers 
Statistical Reports 
Trust Fund Reports 



IX. Annual Report of the Treasurer 
Surplus and Increase in Assets 
Current Operations — College of Liberal Arts 



PAGE 

75 

75-80 
80-83 
83-85 
85-88 
88-89 
89-90 
90-91 

91-92 
92-93 
93-95 

96-104 

97 

97-98 

98-99 

99 

99-101 

101 

102-104 

105-118 

105-115 
106-115 
107 
107-110 
110-112 
112-113 
113-114 
115-116 
116-117 
117-118 

119-170 

119-123 
123-124 



CONTENTS 



CHAPTER 



Self-supporting Departments . 

Building Additions and New Plans 

Gifts 

Auditor's Report of Examination . 

Certificate of Auditor 

Table I. Balance Sheet . 

Table II. Surplus and Deficit Account, 1920-21 

Table III. College of Liberal Arts — Income 
and Expense 

Table IV. Analysis of Income and Expense of 
College of Liberal Arts 

Table V. Dormitories 

Table VI. Dining-HaUs . . 

Table VII. College Bookstore . . . . 

Table VIII. School of Music . . . . 

Table IX. Heat, Light, Power, and Water 
Account 

Table X. Gifts Paid In during the Fiscal Year 
Ending June 30, 1921 

Schedule I. Investment of Endowment Funds . 

Schedule II. Investment of Annuity Funds 

Schedule HI. Buildings, Grounds, and Equip- 
ment 

Schedule IV. Temporary Investments of Build- 
ing and Equipment Funds 

Schedule V. Endowment Funds .... 

Schedule VI. Annuities 

Schedule VII. Building and Equipment Funds 

Schedule VIII. Special Funds for Designated 
Purposes 

Schedule IX. General Funds for Designated 
Purposes 

Schedule X. 

Schedule XL 



Reserves 

Operation and Maintenance of 
Physical Plant, College of Liberal Arts . 
Notes on Tables and Schedules in Annual Report 



PAGE 

124r-125 
125-126 
126 
126 
127 
128-129 
130 

131-134 

135 
136 
137 
138 
139 

140 

141-143 

144r-147 

148 

149-150 

151 
152-154 
155-156 

157 

158 

159-161 
162 

163 
164-170 



CONTENTS xi 

CHAPTER PAGE 

X. College Organization 171-193 

The Charter 171-172 

The Board of Trustees 172-173 

The By-Laws 173-175 

Staff Required for Busmess Department of an 

Endowed College of Moderate Size . . . 175 
The By-Laws of Endowed College, College City, 

Illinois 176-193 

Appendix 194-203 

Index 207-212 



CHAPTER I 

ORIGIN AND SUPPORT OF COLLEGES AND 
UNIVERSITIES 

Colleges and universities of the United States derive part 
of their support from fees paid by students; the remainder 
comes from gifts, from income on endowment, or from 
taxation.^ While even tax-supported institutions may- 
derive part of their income from endowment,^ generally 
speaking, college and university income, aside from student 
fees, comes so largely either from endowment on the one 
hand, or from taxes on the other, that the colleges and 
universities of the United States are usually divided into 
two classes: first, the endowed institutions; second, the 

1 In Bulletin No. 34 of the 1920 Series, published by the Commissioner of Educa- 
tion, the following interesting table is given showing the relative difference in the 
proportional distribution of the receipts for colleges, universities, and technical schools 
as compared with private institutions: 





Percentages 




Public 


Private 


Productive funds 


3.9 
72.9 

0.7 
22.5 


27.7 


Government, state, or city 


3.8 


Private benefactions 


14.3 


Student fees and other sources 


54.2 




100.0 


100.0 



■^ 



2 For example, the budget of the University of California for 1921—22 is 
$7,692,162, of which $299,233 represents income from endowment, and $70,640 dona- 
tions. In the budget of the University of Virginia for 1921—22 the estimated income is 
$821,046, of which $93,194 comes from endowment and $83,331 from gifts and 
bequests. v. 



2 COLLEGE AND UNIVERSITY FINANCE 

tax-supported institutions. The preservation and increase of 
endowment is so important to the well-being of an endowed 
college or university that the present volume is primarily 
written to meet the needs of those who are engaged in manag- 
ing the financial affairs and developing such institutions. 
But, as a matter of fact, aside from the manner of obtaining 
the income, all colleges and universities encounter practically 
the same accounting and managerial problems. Despite the 
prominence, therefore, given in this volume to questions 
connected with endowment, it is hoped that the book 
may also prove serviceable to persons interested in tax- 
supported institutions. 

Harvard College was the first institution of higher learn- 
ing in this country, and the rehgious motive which led to 
its establishment continued for two centuries to be a powerful 
factor in the development of higher education in the United 
States. Even now it exerts a strong influence. The 
Puritan Fathers, having "builded houses, provided necessa- 
ries for their HveUhood, reared convenient places for God^s 
worship, and settled the civil government,'^ longed to 
"advance learning and perpetuate it to posterity, dreading 
to leave an illiterate ministry to the churches when their 
present ministers should He in the dust."^ Not infrequently 
the earliest classes of what are now strong and well-equipped 
colleges were held at the minister's house or at the meeting 
house, and instruction was given in a few subjects by the 
minister. As the number of students increased, special 
quarters were obtained. The minister associated with him- 
self other persons able to share in the instruction, and 
appealed to the members of his particular denomination for 
gifts which would enable him to pay the expenses of the 

1 New England's "First Fruits." 



ORIGIN AND SUPPORT 3 

growing enterprise. In course of time generous benefactors 
gave funds to be held in perpetuity, the income only to be 
used for the maintenance and development of the institution. 
Only in recent times have institutions been founded with 
considerable gifts from a single donor or group of donors. 

Though Harvard was foimded in 1636, and a few other 
institutions in the seventeenth and eighteenth centuries, the 
foundation of colleges and universities did not become general 
until the second quarter of the nineteenth century. One 
other educational institution was estabhshed in the seven- 
teenth century, twenty-one in the eighteenth, twenty-four 
in the first quarter, eighty-five in the second quarter, one 
hundred ninety-five in the third quarter, and one hundred 
forty-five in the last quarter of the nineteenth century up 
to and including 1897. 

Since 1900 the cost of maintaining the endowed college 
has rapidly increased. In consequence men have in general 
sought to make financially secure colleges already in existence 
rather than create new ones. Though the colleges of Oxford 
and Cambridge, the oldest universities in England, are well 
endowed, their resources for the most part date back to the 
Middle Ages. At the present time in the United States 
more than anywhere else in the world institutions of learning 
are the recipients of large sums ranging from single gifts 
running into the millions, down to relatively small amounts 
contributed by those interested for one reason or another in 
the success and development of a given college or university. 
These gifts are sometimes made by individuals, sometimes 
by rehgious groups, sometimes gathered through efforts of 
alumni; not infrequently they come absolutely unexpected. 
From information gathered from publications of the Com- 
missioner of Education, during the last three decades of the 



4 COLLEGE AND UNIVERSITY FINANCE 

nineteenth century, gifts and bequests to education in the 
United States approximated in value $250,000,000; during 
the first decade of the present century they amounted to 
$216,000,000, and for the seven years of the second decade 
to $21 1,000,000. All but a small part of these great amounts 
was given for higher education. 

Nor do these figures tell the whole story, for since 1918 
practically all the endowed colleges and universities of the 
United States have been vigorously engaged in raising addi- 
tional sums for endowment, largely for the special purpose 
of providing income with which to pay increased salaries. 
The rapid rise in the cost of living during the recent world- 
war threw into bold rehef the inadequacy of the salaries 
paid to college and university teachers. There was for a time 
no inconsiderable danger that the teaching profession would 
be seriously damaged. It became necessary not only to 
bring the salaries back quickly to their purchasing power 
before the war, but, in justice to the teacher, to place 
them upon a higher level. Harvard undertook a campaign 
for $15,000,000, Princeton for $14,000,000, Cornell for 
$10,000,000. Every possible effort was made to interest 
and inform the public as to the situation. Mr. John D. 
Rockefeller gave to the General Education Board the sum of 
$50,000,000 in the hope that the board would decide "to use 
the principal as well as the income as promptly and as largely 
as may seem wise for the purpose of co-operating with higher 
institutions of learning in raising sums specifically devoted 
to the increase of teachers* salaries." It is probable that 
this movement will add another quarter of a billion of dollars 
to the endowment of American colleges and universities 
within the next five years. 



ORIGIN AND SUPPORT 5 

A few concrete examples will illustrate the rapid develop- 
ment which has Just been sketched. Yale University, over 
two hundred years old, had in 1900 an endowment of 
$4,942,166. Its endowment is now $25,677,010, and when 
existing pledges are collected will be $31,759,910. The 
endowment of Harvard University has increased since 1900 
from $12,614,448 to $48,546,156. It will possess over 
$50,000,000 when its $15,000,000 fund has been fully paid 
in. Brown University, with $1,252,734 in 1900, now 
has $5,954,239. The endowment of Amherst College has 
increased in the same period from $1,679,252 to $4,825,015, 
and that of Smith College has risen from $707,786 to 
$4,243,000. Moreover, the funds of the last three colleges 
will be further increased when the present campaigns are 
completed. In the Middle West, the West, and the South, 
the same phenomenon may be observed, though the amounts 
involved are, with one exception, smaller. Grinnell College 
in Iowa had in 1900, $597,511 of endowment; in 1921 it 
had $2,477,483, and when it has succeeded in collecting 
all outstanding pledges it will have $3,021,580. Carleton 
College in Minnesota has seen its endowment increase from 
$422,494 to $1,617,068, and will see it increase to $3,136,632, 
when all outstanding pledges are collected. The new 
University of Chicago, founded in 1890, had in 1900 an 
endowment of $5,938,450, and now possesses an endowment 
of $31,537,826. These large sums added to endowment 
by no means represent the total increase in the resources of 
endowed colleges and universities. There have been corre- 
spondingly large sums spent for new buildings and equipment. 
In order to provide for the larger numbers of students now 
seeking higher education, it is still necessary to procure 



6 COLLEGE AND UNIVERSITY FINANCE 

additional resources, partly for buildings and equipment, 
partly for maintenance. 

To complete the picture and to show that the problems 
of accounting and management are not limited to endowed 
institutions, a brief statement should be made regarding the 
resources of tax-supported institutions. These institutions, 
some of which were founded toward the middle of the nine- 
teenth century, have had their main development since the 
close of the Civil War. They are found chiefly in the 
western, the middle-western, and the southern states side by 
side with large or rapidly growing endowed institutions. 
Deriving their support either from the appropriations of 
state legislatures or from a fixed state tax, and in part from 
federal aid, their current annual budgets run in some in- 
stances to upward of $5,000,000. The annual budget for 
1921-22 for current expenses of the State University of Illi- 
nois (exclusive of new buildings) is $4,658,726; of Wisconsin, 
$4,841,965; of Minnesota, $5,886,739; and of Michigan, 
$4,406,429. It is obvious that all these institutions, tax- 
supported and endowed, are large enterprises, the business 
management of which requires training and capacity of a 
high order. 

It will be conceded that endowed colleges and univer- 
sities in the United States have not generally developed sound 
and adequate accounting systems. The reasons for this 
unfortunate condition are not difficult to discover. For 
many years these institutions lived a hand-to-mouth 
existence- Gifts and contributions were at once swallowed 
up in the payment of salaries or bills not infrequently 
overdue. A record of cash receipts and disbursements was 
usually kept, and as a rule httle more. In many cases the 
president did not fully appreciate the need of careful account- 



ORIGIN AND SUPPORT 7 

ing and rarely had at his disposal funds with which to pay 
a competent bookkeeper. The trustees and friends of the 
college, though often successful men of affairs, accustomed in 
their own businesses to rigid financial accounting, trusted 
completely the college administrators and rarely insisted 
upon the adoption of strict business methods in the manage- 
ment of college finance. When they did undertake to 
conduct the financial affairs of the college in a businessKke 
way, often the best they could do was to impose upon the 
college an accounting system which, though admirably 
adapted to the needs of a commercial concern, was not appli- 
cable to an educational institution. A college is not a corpo- 
ration operated for financial profit. Seldom, if ever, does 
its income even in this day permit the accumulation of a 
depreciation reserve for replacing buildings. In conse- 
quence, a commercial system of accounting which shows with 
meticulous care accruing income, building depreciation, etc., 
does not fit the peculiar financial problems encountered in 
the administration of an endowed institution dependent 
for its support and expansion upon gifts. 

The accounting situation in colleges and universities is 
therefore a decidedly mixed one. Many institutions still 
use the primitive methods inherited from their days of 
poverty and small things. A smaller number, endeavoring 
to improve matters, have employed systems unsuited to their 
needs. Relatively few colleges are operated upon the budget 
system. Illogical classification and unsuitable terminology 
too often characterize the financial statements and the 
ledger accounts. Complete balance sheets are rare. Vague 
conceptions of the nature of endowment are quite common, 
and capital receipts and expenditures are not carefully 
distinguished from receipts and expenditures for current 



8 COLLEGE AND UNIVERSITY FINANCE 

purposes. In consequence, the resources are often impaired, 
and misleading statements are made regarding them. 
Terms such as '^resources, " "assets and HabiHties," ''sur- 
plus, " which have a definite meaning, are often incorrectly 
used, with the result that even those connected with these 
institutions do not fully understand their actual financial 
situation. 

The whole problem is not an altogether simple one to 
solve. The modern college with its rapidly growing endow- 
ment, its largely increased investment in buildings and 
equipment, and its more and more complicated business 
problems cannot be efficiently conducted, unless its staff 
includes someone versed in sound business principles. The 
officer in question must understand how to superintend the 
investment of funds, how to account for them, how to make 
and operate a budget which will tend to keep expenditures 
within the limits of income, how to prepare a balance sheet 
which will show, fully and clearly, the financial status of the 
institution, and finally, he must realize that college operation 
differs from the operation of a commercial or manufacturing 
concern. The larger colleges have not hesitated to incur 
the expense involved in maintaining an efficient financial 
department, realizing that it is the wisest thing to do, but 
as a matter of fact it is perhaps even more important that 
the smaller college, with its limited resources, should be 
conducted upon the most efficient business basis possible. 

During the last few years the author has carefully 
examined the financial management and accounting of 
several hundred American colleges and universities. He can 
testify unreservedly and emphatically to the fact that 
practically without exception the financial affairs of these 
institutions are honestly conducted. Differences of opinion 



ORIGIN AND SUPPORT 9 

and errors of judgraent have been, of course, encountered, 
as they are encountered in the most carefully and compe- 
tently managed business concerns. But not only are the 
administrators of the American college honest men, but they 
go too far as a rule in endeavoring to make a dollar do more 
than a dollar's worth of service, especially in the matter of 
salaries. Honesty of conduct, however, is not enough; 
there must needs be efficiency. Accounting methods 
employed are often poorly adapted to academic uses, and in 
their zeal to render public service college administrators 
have at times involved their institutions in financial diffi- 
culties through attempting more than they have the means 
to perform. Having no proper methods of accounting they 
are not infrequently surprised to find their institutions in 
serious financial difficulty. Common defects of academic 
financing and accounting may therefore be briefly summar- 
ized as follows: (1) the use of accounting systems unsuited 
to college needs, which fail to portray the actual financial 
status of the institution and, (2) the absence of a budget 
system which tends to keep expenditures within the limits 
of income. 



CHAPTER II 
RECEIPTS 

SOURCES 

The receipts of endowed colleges are of three principal 
kinds: (1) student fees, (2) income on endowment, (3) 
gifts. 

Some colleges also derive income from the operation of 
dormitories, dining-halls, bookstores, and other activities, 
but in these cases the net income only is available for their 
educational work. They occasionally receive income from 
the rental of college buildings, from the sale of obsolete and 
not needed equipment, and from miscellaneous sources. 

STUDENT FEES 

student fees fall into four classes: (1) fees for tuition; 
(2) fees for laboratory materials and supplies; (3) fees for 
incidental expenses and library facilities; (4) fees for break- 
age, damage, and loss. 

The fee for tuition is primarily designed to cover what 
is thought to be the student's share of the cost of furnishing 
the education which he receives. It is a generally accepted 
principle that a student should not be required to pay what 
it costs the college to provide his education, else students 
with slender resources may be deprived of the advantages of 
college training. Higher education should be conducted on 
a democratic basis. No definite practice has been followed 
by colleges in determining the part of the cost of education 

10 



RECEIPTS 11 

which should be borne by the student. Some college admin- 
istrators have expressed the opinion that tuition fees should 
cover the amount of salaries paid for instruction, leaving the 
administrative expenses of the college and the cost of operat- 
ing and maintaining its physical plant to be provided from 
other sources. The amount paid by the better-endowed 
colleges for instruction approximates about one-half the 
total expense incurred for strictly educational operation. ^ 
The amount received from tuition fees rarely equals or even 
approximates the sum paid for instruction. If the opinion 
stated above were to be adopted as a basis, the tuition fee 
should equal the salaries paid to teachers divided by the 
average number of students in attendance. But in fixiag its 
tuition fee the endowed college does not usually proceed 
upon this principle. It takes other things into consideration. 
The class of student it attracts, their economic status, the 
competition of neighboring colleges and of tax-supported 
institutions, and the desire to offer students of its own 
denomination the advantages of higher education under 
conditions which are beheved to be most favorable, are 
more often the deciding factors. 

In Bulletin No. 30, 1918,2 of the Department of the 
Interior, Bureau of Education, a committee reporting on the 
resources and standards of colleges of arts and sciences stated 
that '^Institutions should strive to bring their endowment to 
the point where it will yield at least half the money needed for 
annual expenses." If this goal were attained, the other half 
of the annual expense would have to be provided from other 
sources, of which tuition fees are the chief.^ 

' "Strictly educational operation" includes administration, instruction, and the 
operation and maintenance of the physical plant of the college. The cost of the opera- 
tion and maintenance of dormitories, dining-halls, and special schools is excluded. 

2 P. 44. 3 Note 1, p. 1. 



12 COLLEGE AND UNIVERSITY FINANCE 

Almost without exception college administrators prefer 
to keep tuition fees as low as possible. The increasing costs 
of college operation since the European war, however, 
especially for the operation of the physical plant and for the 
higher salaries which are being paid as a result of the efforts 
to put the salaries of the faculty on a basis commensurate 
with the increased cost of living, have impelled them to 
increase fees. If a fixed relation should exist between salaries 
and receipts from tuition the tuition fee should be increased 
as salaries are increased. There can be no sound objection 
to at least a proportionate increase in tuition fees, especially 
if provision is made for scholarships and for loan funds to care 
for worthy students unable to pay the higher rate. 

The fee charged for laboratory materials and supplies is 
ordinarily supposed to be equivalent to their actual cost, 
including service, and is levied to reimburse the college and 
to put the courses in science requiring laboratory work 
financially on a par with those in the humanities. 

Colleges also often impose specific fees: a matriculation 
fee, paid at the time of admission, which is supposed to cover 
the expense incurred in passing upon entrance credits and 
enrolling students; a graduation fee, paid when the student 
receives his degree; a library fee for the use of the library, 
which is usually devoted to the purchase of books; and an 
incidental fee to help defray the overhead cost of administra- 
tion. There may be also athletic fees, locker rental fees, 
and fees for college concerts. 

Breakage and deposit fees are exacted in advance to 
protect the college from loss arising through loaning students 
scientific material and keys, aiid from wilful damage to 
property. Any portion of the fee unused is refunded to the 
student at the end of the term. 



RECEIPTS 13 

Fines are imposed for failure to observe rules regarding 
registration, payment of fees, and the return of books and 
materials. 

ADVANCE PAYMENT OF FEES 

Students should be required to pay all fees within the 
first few days of the quarter or term, or to make satisfactory 
arrangements for their payment. This rule, announced by 
most colleges, is more honored in the breach than in the 
observance. It should, however, be followed strictly, for its 
observance operates as much to the advantage of the student 
by training him in good business principles as it benefits 
the college by the prompt receipt of cash, by eliminating 
the expense of collection, and by avoiding bad debts. The 
reason most frequently given for not insisting upon prompt 
payment is that it might work a hardship on the poor student 
and might exclude him from college. Experience shows that 
the enforcement of the rule has not had this effect, for almost 
without exception a student earnestly desiring an education 
will in some way obtain the needed money. 

The enforcement of the rule is good policy, for the student 
whose obhgations are settled has a more wholesome attitude 
toward his college than one who is in its debt. If fees are not 
collected promptly the student is more likely to be captious 
and critical and offer complaints of various kinds as excuse for 
non-payment. Experience has shown that it is difficult to 
collect fees after the term has expired . A comparison between 
two institutions is instructive : One, a middle-western college, 
pursues a lenient policy; it does not insist upon prompt pay- 
ment of fees, but allows its students time in which to pay their 
tuition, board, rent, and athletic fees, even furnishing several 
of these items at an immediate outlay of its own cash. It 



14 COLLEGE AND UNIVERSITY FINANCE 

always has a large amount uncollected, a considerable propor- 
tion of which is never paid. The University of , 

in the same section, with a very much larger number of 
needy students, makes its collections in advance, exceptions 
being extremely rare, and in those cases it takes promissory 
notes bearing interest. No difficulty in enforcing the rule 
is experienced by the latter institution. Incidentally, the 
former teaches its students to be lax, the latter trains them 
to be prompt and businesslike. 

INCOME ON ENDOWMENT 

Income on endowment forms a large part of the receipts 
of an endowed college. It consists of interest on bonds, 
mortgages, and loans, dividends on stocks, and rentals from 
real estate in which the endowment funds are invested. 
It is perhaps impossible to say what particular proportion 
of the total income should come from endowment, but 
attempts have been made to prescribe the minimum amount 
of endowment which a college should possess. For example, 
the Indiana State Teachers' Training Board places as its 
standard in this respect for accrediting institutions a pro- 
ductive endowment beyond all indebtedness, of $500,000, 
or in lieu of this endowment a fixed annual income, inde- 
pendent of all student fees, of not less than $25,000. The 
Committee of the Federal Bureau of Education, to which 
reference has been made,^ held that the ^'minimum endow- 
ment of a college of arts and sciences should be $250,000." 
The North Central Association of Schools and Colleges 
requires a minimum endowment of $200,000 before classifica- 
tion is given an institution as an accredited college. This 
standard was established twenty-five years ago and is recog- 

1 p. 11 of thisSchapter. 



RECEIPTS 15 

nized now as wholly inadequate. The Association of Colleges 
and Secondary Schools of the Southern States recently changed 
its minimum to $500,000. Colleges, however, try to get as 
large an endowment as possible so as to make their foundation 
secure and enable them to operate without a deficit. 

GIFTS 

With the exception of the fees received from students, 
an endowed college gets its income either from gifts and 
grants or from funds previously donated. Funds for endow- 
ment, for buildings, for purchase of land, for additional 
equipment and books, and provision for deficits, are procured 
through gifts and bequests. Gifts fall naturally into two 
classes: those which add to the permanent assets of the 
college, and those which are designed for current uses. 
They may be made by individuals, by groups of individuals 
and classes, or by synods, conventions, and conferences, but, 
whatever the source, they should be suitably acknowledged 
and properly recorded. Those which add to the permanent 
assets should be recorded among the capital assets, and those 
available for current expenses should be recorded among 
the current receipts. 

SiQce endowed colleges depend so largely upon gifts for 
their maintenance and expansion, special efforts are made to 
stimulate them. In addition to the work which the president 
of the college does in this direction, an oflacer is often regu- 
larly employed, called a field agent or financial secretary. 
He visits the alumni and friends of the coUege, keeps them 
informed of its needs, and urges them to contribute to its 
funds. He conducts a campaign of education through 
correspondence, pubhcations, and news items. Special 
emphasis is now being placed upon annual contributions for 



16 COLLEGE AND UNIVERSITY FINANCE 

current expenses. Many alumni and friends who cannot 
give a large sum for endowment are often willing to make 
annual contributions. However, uncertainty as to whether 
these gifts will be continued year after year makes it difficult 
for the college to determine its financial policy in advance, 
whereas if its needs are met by endowment, it knows precisely 
on what it can count. On the other hand, dependence on 
its constituency for annual contributions may keep it in 
closer touch with its friends and may discover others, while 
requests for funds may add new students as well as income. 
Since the college needs income it resorts to that method 
which to the fullest extent and in the most dependable 
manner provides additions to its current funds. 

Gifts for current purposes are most useful if no particular 
conditions are attached to them. Donors often make gifts 
for prizes, lectures, or other restricted purposes, which, 
however useful, do not help the college to meet its pressing 
regular expenses. Moreover, it frequently happens that the 
acceptance of a gift for a special object involves the college 
in additional expense not covered by the amount of the 
gift. If so, provision should be made for meeting the 
additional expense before accepting the gift. Gifts for 
recitation buildings, libraries, and laboratories are examples. 
The upkeep and maintenance of such buildings cause an 
annual expense which often requires the income of a fund 
nearly equal to the original gift. In this sense every such 
building is a liability as well as an asset. Before accepting 
a gift for such a purpose — at any rate before taking any action 
toward the end contemplated by the gift — the college should 
obtain an endowment to provide for the annual expenses 
which its acceptance involves, or assure itself that in some 
other way it will have ample income for the purpose. 



RECEIPTS 17 

Besides the efforts made by the college authorities to 
obtain contributions, alumni maintain organizations for the 
same object. Classes and individuals are urged to be con- 
stant in helping their Alma Mater, especially by making 
annual contributions. Alumni often reserve the right to 
designate the objects to which their gifts shall be applied, 
but these, like other gifts, are most useful if absolutely 
unrestricted. An excellent example of the way in which 
alumni may assist by annual contributions is furnished by 
Yale University, whose graduates contribute yearly, through 
organized class effort, approximately half a million dollars 
to the University treasury. This is equivalent to the 
income at 5 per cent on an endowment of $10,000,000. 
Nor does the graduate feel that his annual subscription, 
large or small, finally discharges his obligation to his Alma 
Mater. On the contrary, giving to his college, once estab- 
lished as a habit, is likely to become a passion, as well as 
a duty. Large gifts and bequests may ultimately result from 
annual contributions, which, small at first, become larger 
as the graduates prosper. 



CHAPTER III 

DISBURSEMENTS 

A college expends its money for two general purposes: 
(1) for land, buildings, and equipment; and (2) for expenses 
of operation. 

Disbursements for the first purpose are sometimes desig- 
nated as "Capital Expenditures" because they are made 
for those material and enduring objects which in a factory or 
manufacturing estabHshment would be called "Plant or Fixed 
Assets/ ' Expenditures for a manufacturing plant are made to 
enable it to function efficiently and yield the greatest financial 
return on the capital invested; in like manner the expendi- 
tures for a college plant should be made to enable it to function 
adequately from the point of view of need, convenience, 
economy of operation, and, within reason, artistic impres- 
sion.^ Outlays on a college plant not warranted by the tests 
mentioned above are out of place for they involve the college 
in unnecessary expense. They are foreign to the purposes 
for which the college exists. Disbursements for capital 
purposes should be kept distinct from those for expenses of 

1 "Within reason" is used advisedly. It would be most desirable educationally if, 
in providing grounds and buildings, colleges could pay as much attention to beauty as 
they pay to education. But buildings, grounds, and their upkeep are so expensive 
that, unless administrators are cautious, educational work may be crippled by the 

cost of constructing and maintaining beautiful buildings. College, in the 

Middle South, now spends the entire income of its endowment in keeping up the new 
plant which it has lately built, and even this will not suflBce when, with the progress 
of time, repairs become necessary. There is nothing to be said in defense of the 
tasteless, not to say ugly, structures put up by the colleges of previous generations, 
but the pendulum may swing too far in the opposite direction. A college is a school; 
it needs money for salaries, apparatus, and books, and artists, architects, and designers 
should not be permitted to forget this fundamental fact. 

18 



DISBURSEMENTS 19 

operation, and should be provided for before they are 
incurred. 

Disbursements for capital purposes are made for new 
buildings, furniture, improvements and additions to buildings, 
new roads and walks, new connections for heat and power 
plant, tunnels and mains. For all such disbm-sements, when 
not provided from current income, capital receipts must be 
procured. 

The question is often asked : What distinction should be 
made between building equipment and equipment for the 
scientific departments using the building? Difficulty natu- 
rally arises at the point where the individual characteristics of 
each are least prominent. As a rule "building equipment" 
refers to furniture and permanent equipment which must be 
included in the building, whatever department may use it, and 
"scientific equipment" means that apparatus and equipment 
which must be specially provided for the needs of the 
scientific departments. 

An endowed college makes capital disbursements for the 
purchase of investments for its endowment funds, but as 
these purchases are usually made to replace other invest- 
ments which have been paid they do not add to the material 
resources of the college. Their treatment and nature will 
be fully discussed in the chapter on endowment and need 
no further elucidation here. 

EXPENSES OF OPERATION 

The second pm-pose for which expenditures of a college 
are made is for the current operation of the institution. 
These expenditiu-es may be divided into four classes: (1) 
those incurred in the operation of the college as such; (2) 
those incurred in the operation of auxihary departments; 



20 COLLEGE AND UNIVERSITY FINANCE 

(3) those incurred in the operation of dormitories, dining- 
halls, bookstores, etc. ; (4) those incurred in raising funds. 

In financial reports college ofiicers do not always separate 
the expenses of operation in the manner described above, 
but include all in one statement. In such cases it is difficult, 
not to say impossible, to ascertain what is the cost of college 
operation for strictly educational purposes, and to compare 
such cost with the cost of another college of the same size 
or character which may not operate a dining-hall or book- 
store, or may not have dormitories. If the classification 
which is here suggested is followed, the cost of the educa- 
tional work of the college will be at once apparent, and 
this cost may be readily compared with similar costs else- 
where. 

Expenses of Class 1 are those which are common to all 
colleges and should be included in the college budget. They 
may be termed ''Budget Expenditures," and fall into three 
main groups: (1) administration and general, (2) operation 
and maintenance of the physical plant, (3) instruction. 

The first group includes all expenses incurred in the 
administration of the college as a whole, viz.: the cost of 
the administrative offices, and the other general overhead 
expenses. The second group, operation and maintenance of 
the physical plant, embraces those expenditures made to 
maintain and preserve the college buildings and grounds and 
make them available for the use of the administrative and 
educational departments. The expenditures in this group 
are for: (a) superintendence; (5) janitors; (c) heating, 
hghting, and water; (d) repairs; (e) care of grounds; (/) 
insurance; (g) materials and supplies. The expense of 
maintaining buildings used for dormitories, dining-halls, and 



DISBURSEMENTS 21 

the like should not be included in this group as a part of 
Class 1 because their operation is not a part of the 
educational work of the college. The third group of edu- 
cational expenses, instructional, embraces the cost of fur- 
nishing instruction to the students, the main object of the 
college. These expenditures are for (a) salaries of instruc- 
tional staff, (h) equipment and books for educational depart- 
ments, (c) suppUes and expenses of educational departments. 
The classification and arrangement of the educational ex- 
penses in the budget, and the principles to be followed in 
estimating and operating the budget are described in the 
chapter on accounting.^ 

DISBURSEMENTS OF AUXILIARY DEPARTMENTS 

In addition to the work which is carried on by colleges 
functioning as colleges of arts, literature, and science, they 
at times maintain auxihary departments, e.g., of music and 
of the fine arts. In very rare instances are these departments 
conducted as part of the educational work of the college. 
In nearly all cases a part only of the work in them is counted 
toward the regular college degree, and the departments are 
supposed or expected (particularly at the outset) to be self- 
supporting — sometimes even to yield a profit. To know 
exactly what happens, whether the department operates at a 
loss, sustains itself, or yields a profit, an accurate and separate 
accounting should be kept of its receipts and expenditures. 
The cost of materials and services furnished by the college 
from its storerooms and central power plant must be included. 
The departments in question should be charged rental for 
the use of college buildings, and depreciation to provide 
for the replacement of the buildings and equipmejit used. 

iP. 67. 



22 COLLEGE AND UNIVERSITY FINANCE 

Expenses of these departments are of the same general 
character as those of the college of arts, and should be 
controlled by the same budget method. A separate budget, 
however, should be made for each. 

DISBURSEMENTS FOR DORMITORIES, DINING-HALLS, 
BOOKSTORES, ETC. 

The third main division of expenses of operation includes 
the cost of operating those departments which, though not 
forming a part of the strictly educational work of the 
college, may yet be necessary from the point of view of com- 
fort and convenience of students and faculty. Dining-halls, 
dormitories, and bookstores are examples. The cost of opera- 
tion of each of these should be kept in separate accounts apart 
from all other operating costs of the college, first, because these 
departments are conducted usually on the theory that they 
should pay their own way, and unless a strict and complete 
accounting is kept, that theory cannot be proved; second, 
because the cost of education is unknown if these quasi- 
business operations are not kept strictly separate from it. 
Expenditures for these departments are made for services, 
materials, supplies, rentals, repairs, renewals, replacements, 
and depreciation. 

EXPENDITURES INCURRED IN RAISING FUNDS 

Expenses involved in raising money to meet the cost of 
current operation are part of the general expense of the 
college and should be included in the college budget. An 
endowed college, however, is usually seeking funds for new 
buildings, equipment, additional campus, and larger endow- 
ment, and may incur considerable expense in so doing. 
Expenditures are made for the salaries and traveling expenses 



DISBURSEMENTS 23 

of solicitors, for printing and publishing bulletins and 
pamphlets, and for entertainment. These expenditures are 
often erroneously charged to the current expenses of the 
college. Sometimes they are deducted from the amount 
raised. When this custom is followed a statement should 
be made to that effect when the fund is being solicited to 
prevent misunderstanding. The best way to provide for 
these expenses is to raise a fund especially for that pur- 
pose. 



CHAPTER IV 
ENDOWMENT 

Since endowment provides a large part of the income of 
an endowed college and gives its name to the class, an exposi- 
tion of the manner in which such funds should be adminis- 
tered and preserved is presented in this chapter. 

DEFINITION 

College endowment is a fund, the principal of which is 
invested and kept inviolate and only the income used for the 
general support of the college, or for some specific object 
in connection with it. The fund thus estabHshed is sacred 
and should not be touched or encroached upon for any 
object whatsoever; its income alone is available. Unless 
this fundamental fact is understood and respected, the 
endowed college is built upon an insecure foundation. A 
college has no right, moral or legal, to "borrow" from 
its endowment, to hypothecate endowment securities, to 
"invest" endowment in college buildings and equipment, 
or, in fact, to do anything with endowment except to invest 
it so that it will produce a certain and steady income. 

IMPROPEE USE OF THE TERM "ENDOWMENT" 

It is amazing to find how rarely the term "endowment" 
is used in its correct sense. This would be a trivial matter 
if it were simply a matter of definition. But, as the reader 
will soon perceive, unless the term "endowment" is properly 
understood by the trustees and officers, the financial policy 

24 



ENDOWMENT 25 

of an endowed college may go seriously astray. Endowed 
colleges, conducted by thoroughly honest and well-meaning 
men, have at times been seriously embarrassed or wrecked 
because those in charge did not know what endowment is 
and what principles must be adhered to in managing trust 
funds. College authorities frequently use the term '' endow- 
ment '^ in a wrong sense, including under that name sums of 
money given for college buildings and land. A donation for 
the erection of a recitation building is not endowment, for, 
in the nature of things, the structure cannot last forever, 
and is in itself not income-producing. According to the 
definition of endowment here given — namely : a fund which 
shall he maintained inviolate, the income of which shall alone 
he used — gifts for the purposes mentioned above are not 
"endowment.'^ Some college administrators include in 
endowment certain funds, the principal of which, as well as 
the income, may be used. If the principal is ever used, the 
fund of course is but temporary, and hence is not endowment. 
It is better to call these funds ''Funds for Special Purposes, " 
and thus differentiate them from endowment. 

Colleges often receive gifts and bequests without condition. 
In such instances the trustees are warranted in using the 
principal, as weU as the income, as they choose. They 
often decide to add these gifts and bequests to endowment, 
and then later justify the use of endowment as collateral for 
current loans, for the erection of buildings, or for some other 
object, on the ground that it includes sums which were given 
without restriction as to use of principal. When this occurs 
the finances of the college are inextricably mixed, the 
inviolabihty of actual endowment is lost and the amount 
used in the manner described frequently exceeds the amount 
of unconditional funds which were included. To obviate 



26 COLLEGE AND UNIVERSITY FINANCE 

any such disaster, and to preserve rigidly the sacredness of 
real endowment, under no circumstances should any such 
donation be included in endowment unless it has been set aside 
as endowment by deliberate action of the trustees. Such 
action should be irrevocable, and the sum so included should 
henceforth be treated in the same manner as sums originally 
given as endowment. ^'Once endowment, always endow- 
ment, " is the only safe and clear rule. Until such time as 
the trustees shall have decided to place an unrestricted fund 
irrevocably in endowment it should be carried as an uncondi- 
tional general fund, and its assets should be included among 
the general assets of the college. By keeping unrestricted 
general funds in a separate account, the trustees can always 
know what sum is available for collateral for loans, or for 
any other college need. 

There is another reason for carrying the fund separate: 
If the amount of endowment is shown at one figure in one 
annual report and placed at a smaller sum in succeeding 
reports because certain items which were first included in 
endowment have been withdrawn and devoted to other 
objects (and especially if the reports are not clear as to what 
the objects are), the friends and supporters of the college 
may get an erroneous impression of the care with which 
endowment is safeguarded, and their attitude toward the 
college may thereby be unfavorably affected. 

SOURCE OF ENDOWMENT 

Colleges obtain endowment from two general sources: 
from persons who give spontaneously and from those who 
are solicited. Alumni make gifts and bequests to show their 
love and appreciation of their Alma Mater. Many others 
contribute generously to college endowment because they 



ENDOWMENT 27 

beKeve that college training is of great value as a preparation 
for a useful life. Some of these persons, not having attended 
college themselves, may desire to make it possible for poor 
students, situated as they once were, to go to college. The 
large number of persons who aid colleges spontaneously is 
one of the most interesting phenomena of the present century, 
and speaks eloquently for the high regard in which college 
training is held. 

The burden placed upon colleges by the increasing cost 
of operation, by the advancing standard of education, by 
the desire to make them of the widest possible service, and 
the unwillingness to shut the door of opportunity to any 
worthy student by the imposition of high fees, have led to the 
solicitation of endowment not only from those who may be 
naturally interested, but from all persons of means. Alumni 
organizations and associations urge trustees, alumni, and 
former students to make gifts for endowment, and people 
living in the college town and territory are asked to assist 
on the grounds of local pride. Since many of the endowed 
colleges were established by and are affiliated with religious 
denominations for the express purpose of surrounding the 
students with a rehgious atmosphere, members of these 
denominations are appealed to for aid on the ground of 
rehgious sympathy and obHgation. 

UNEESTRICTED AND RESTRICTED ENDOWMENT 

Endowments fall into two principal classes : unrestricted, 
or general, and restricted, or special. The income from 
unrestricted endowment may be used for any of the legitimate 
needs of the college. The income from restricted endow- 
ment may be used only for the express purpose for which 
the fund was given. In the case of restricted endow- 



28 COLLEGE AND UNIVERSITY FINANCE 

ment care must be taken to see that any income not used 
during the year is carried forward to the next year's account 
so as to be appHed to the specific purpose. College officers 
are not always careful in this particular, especially where 
the specific purpose forms a part of some large item of 
expense, such as instruction. 

Unrestricted endowment is most acceptable because its 
income can be used in accordance with changing conditions, 
which must arise in the course of long periods of time, 
and which at present are coming with startling rapidity. 
Trustees should exercise caution in accepting gifts containing 
conditions which may become difficult to fulfil, and should 
try to persuade prospective donors to make gifts free from 
restriction. As a rule, suggestions are welcomed by donors, 
and they willingly make gifts in harmony with the established 
poHcy of the college, especially if it has been well defined 
and declared. 

Endowment which provides for chairs or departments 
which are a part of the regular work of the college, such as 
chairs in Enghsh, mathematics, and history, is next in value. 
Provisions for these chairs sets free a corresponding amount 
of unrestricted income which can be used for other purposes. 
Endowment for unusual subjects may be interesting and 
useful, but does not help the college to carry on its indispen- 
sable work. Terms of restricted endowment may become 
obsolete, and colleges may not modify or change conditions 
imposed by the donor unless permitted to do so by a court of 
chancery.^ 

1 The following explanation of the doctrine of cy pres has been furnished by the 
Counsel of the University of Chicago: "Under the doctrine of cy pres courts have 
granted permission to apply gifts in a manner differing from the expressed conditions. 
This doctrine has been described in Bispham's Principles of Equity as follows: 

" ' The cy pres doctrine is one under which courts of chancery act, when a gift for 
charitable uses cannot be apphed according to the exact intention of the donor. In 



ENDOWMENT 29 

GIFTS OF PROPERTY AND SECURITIES TO BE ENTERED AT 

ACTUAL VALUE 

Gifts for endowment may be made in cash, securities, 
or any property possessing value. Preservation of the 
principal being a most essential feature of endowment, 
gifts of securities and property should be accepted at their 
market value at the date of gift. If that value cannot be 
ascertained readily, a competent person, or persons, should 
be asked to estimate their value as of that date. Gifts for 
endowment are sometimes accepted at a value placed upon 
them by the donor, or at par, when such valuation exceeds 
their real worth. Should the college later dispose of the 
property for a smaller sum, the loss would cause a reduc- 
tion in book value of endowment, and might lead to the 
erroneous impression that endowment had been dissipated. 
Even while the college retains the property, the inflated value 



such cases the courts will apply the gift, as nearly as possible (cy pres), in conformity 
with the presumed general intention of the donor; for it is an estabhshed maxim in 
the interpretation of wills, that a court is bound to carry the will into effect if it can 
see a general intention consistent with the rules of law, even if the particular mode or 
manner pointed out by the testator cannot be followed. Good illustrations of this 
doctrine will be found in the Balhol College case (Att. Gen. v. Guise, 2 Vern. 266; 
Att. Gen. v. Balhol Coll., 9 Mod. 407; Att. Gen. v. Glasgow Coll., 2 Collyer, 665; 
1 H.L. Cas. 800), and in the Ironmongers' Case.' (Att. -Gen. v. Ironmongers Co., Cr. 
and Ph. 208). 

"The cy pres doctrine as commonly imderstood has two features. The first is 
the right to exercise the prerogative authority, whereby a court is enabled to deal 
with a bequest to a charitable use having no particular purpose, as a bequest to charity 
generally, treating the purpose as the legatee or as a bequest for an illegal purpose, or 
some purpose impossible of execution for some reason. The other is the right by 
liberal rules of construction, to deal with a trust having a designated purpose, though 
in general terms, and enforce it within the hmits of such purpose, supplying the trustee 
if necessary. 

"Again I quote from Bispham, this a statement of the rules of the different states. 

" 'It is, nevertheless, true that the cy pres doctrine has in many cases in the United 
States been regarded with considerable disfavor. 

" 'In Fontain v. Ravenel (17 How. 369) the Supreme Court of the United States 
seemed to be opposed to the cy pres doctrine; but in Lorings v. Marsh (6 WaU. 337) 
and the Mormon Church Case (136 U.S. 1) the doctrine was approved. 

" 'In North CaroKna, Connecticut, Indiana, Iowa, Alabama, and Wisconsin the 
cy pres doctrine has been repudiated. In Pennsylvania, although the principles of 



30 COLLEGE AND UNIVERSITY FINANCE 

at which it is carried on the books causes the income return 
to appear to be relatively low and gives the impression of 
poor business management. 

BOOK VALUE OF ENDOWMENT ASSETS SHOULD NOT BE 
CHANGED TO RECORD ESTIMATED VALUES 

Real estate is often given for endowment, which, in the 
course of time, increases in value because of changing condi- 
tions. Even in these, as in other cases, it should be carried 
on the books at its real value at the time when it was given, 
and no change should be made except to record expenditures 
for additions and improvements, which increase the value of 
the property. Buildings will of course depreciate in the 
course of time and become valueless. Provision for the 



the statute of Elizabeth were said to have been adopted, the cy pres doctrine was 
rejected; but the doctrine to a hmited extent was subsequently introduced by statute 
[Note. — But it seems the doctrine now exists in all its fullness]. In Maryland and 
Virginia neither the statute of Ehzabeth nor its principles are in force, and charities 
are treated as ordinary trusts; and the same conclusion has at last been reached in 
New York, South Carohna, West Virginia, and Wisconsin; and in Minnesota, with 
certain exceptions. 

"'But in many of the states, on the other hand, the cy pres doctrine has been 
received with more favor. In all of the New England states it has been directly 
countenanced or left an open question. In Missouri and IlUnois the doctrine has been 
approved. In New Jersey the question has not been decided, although it has been 
said that a bequest that would be enforced in England might not be carried into effect 
in that state, on the ground of the indefiniteness of its objects, or the impracticability 
of its exact execution. 

" 'There seems, indeed, to be no vaUd reason why the judicial cy pres doctrine, as 
explained in Jackson v. PhilUps, should not be approved in all those states wherein the 
statute of Elizabeth has been decided to be in force, or where its principles have been 
adopted by the law of the state; in other words, in those states where the doctrine 
that indefiniteness of the object is no objection to a trust, provided it is for a charity, 
is recognized. This is the case in many of the states of the Union.' 

"The case of Jackson v. Phillips (14 Allen 571) referred to above was one in which 
one of the trusts in the will was for the circulation of literature to create a public 
sentiment to put an end to negro slavery in the states. After the death of the testator, 
but while the will was being htigated, slavery was aboUshed by Constitutional amend- 
ment. The designated purpose having failed, the fund was applied to the New 
England Branch of the American Freedmen's Union Commission." 



ENDOWMENT 31 

diminishing value must be made each year by charging 
its amount against income so as to keep endowment intact. 
Cognizance should not be taken of any increase in value 
in real estate not actually realized by sale. When the 
property is sold and the profit actually in hand, the endow- 
ment should be augmented by the amount of the profit. 
The figures on the books should at all times represent actual 
transactions and should not be modified to record estimates 
of changing value. This rule applies not only to gifts of 
real estate, but also to gifts of securities, and to investments 
made by the college itself. There is no valid reason for 
increasing the book value of endowment investments, but, 
where a college decides to mark up the value of property or 
securities the amount of estimated increase should be added 
to the funds to which the securities or property belong. 
Under no circumstances should an increase be made in the 
book value of investments of endowment funds to replace 
endowment used for other purposes. For example, if John 
Doe gives a security valued at $10,000, whose market value 
later increases to $30,000, the college should not write up 
the book value of the security so as to account for the use 
of $20,000 endowment for current expenses. If the book 
value is written up the amount to the credit of endowment 
should be correspondingly increased. A well-known uni- 
versity had recently among its investments a city building 
carried at a value of a million dollars. The building had 
cost the university about six hundred thousand dollars, 
but its book value had been changed from time to time 
without any increase in the university's endowment, while 
the rate of income on the property for the past three years 
had averaged less than 3 per cent, and no charge had 
been made for depreciation. 



32 COLLEGE AND UNIVERSITY FINANCE 

PRINCIPLES OF INVESTMENT 

As endowments are established to provide permanent 
regular income, it is important that they be invested in such 
a way that the income shall be assured and the principal 
kept intact. Safety of principal is the first consideration; 
otherwise, the permanency of the income may be endangered. 
The size of the income, though important, is secondary. 
The scale of expenditures expands quickly to equal an 
increasing income, but does not respond easily when income 
diminishes. It is, therefore, in the long run better to have 
a stable income, even if somewhat smaller than might be 
obtained temporarily, than to enjoy a larger income for a 
short period and later to be obliged to reduce expenses be- 
cause of its curtailment. To safeguard the principal of endow- 
ment, and at the same time to get a good income, is one of 
the chief problems of the trustees of an endowed college. 
Many states have passed laws describing and Hmiting the 
kinds of investments in which trust funds held by banks, 
trust companies, and others may be placed. These laws 
aim to maintain the body of the trust, and yet realize the 
largest income consistent with security. So far as I know, 
trustees of endowed colleges are not required to conform to 
the provisions of these laws in investing endowment, and 
under some charters they are especially exempted. But 
they should, nevertheless, familiarize themselves with them 
and be able fully to justify investments which do not har- 
monize with the trust laws.^ 

SUITABLE KINDS OF INVESTMENTS 

It is not easy to specify in detail the kinds of investments 
which colleges should make. At best only general principles 
can be laid down. 

1 See Appendix for Wisconsin Trust Laws as to Investments for Trust Funds. 



ENDOWMENT 33 

Investments of a purely speculative character, such as 
stocks of mining corporations and of new companies whose 
stability has not been demonstrated, are not suitable. As a 
rule, common stocks should be avoided. If any exception is 
made, it should be in favor of well-estabhshed companies 
with a large margin of surplus and a regular dividend record 
covering a long period. Carefully selected first mortgage 
bonds and real estate first mortgages on improved farms in 
good locahties, preferably in the same state as the college, 
or in contiguous states, and first mortgages on city property 
where the college is located, or in nearby cities, make proper 
investments. The proximity of the property mortgaged 
makes it easier to learn its value and to note any circum- 
stances which might lead to its depreciation. Since real 
estate mortgages usually run from three to five years, no 
serious depreciation in value should occur in that time 
which was not foreseen by the trustees. Loans secured by 
mortgages should not exceed 50 to 60 per cent of the appraised 
value of the property. The value should be estabHshed 
by personal investigation by the college authorities, assisted, 
if necessary, by a person skilled in real estate values. The 
title should be examined by an attorney, and no loan should 
be made unless the title is clear, preferably guaranteed. 
It is better not to loan on property whose value depends 
upon its use for a special purpose or business, unless the loan 
is proportionate to the value which the property would have 
for any other purpose whatsoever. An example of making 
loans on property used for a special purpose is furnished by 
College, which has loaned the greater part of its endow- 
ment to churches and hospitals belonging to the denomina- 
tion which supports the college. These loans, being of a 
special character, are not readily negotiable. If they are 



34 COLLEGE AND UNIVERSITY FINANCE 

not paid when due, or if the interest becomes delinquent, 
the college has not the usual recourse, but from considerations 
of policy must continue to carry them. Inducement to 
make loans of this kind was doubtless very great, but if the 
college had incorporated in its by-laws a rule prohibiting it 
from loaning money on property used for special purposes 
it would have been protected against the difficulties inherent 
in the situation in which it now finds itself. 

DIVERSIFICATION OF INVESTMENTS 

College funds should be invested to provide suitable 
diversification as to kinds and to territory in which the invest- 
ments are located. Securities purchased should be repre- 
sentative of different businesses and industries so that if 
any are affected by depression, strikes, or untoward circum- 
stances, the entire endowment income will not suffer. A 
historic instance which should serve as a warning is furnished 
by the early history of Johns Hopkins University. Its 
original endowment was given by Mr. Hopkins in the form 
of Baltimore & Ohio Railroad stock — so valuable at the time 
and seemingly so secure that in a letter Mr. Hopkins recom- 
mended that his trustees should hold and protect it. Within 
a few years financial disaster overtook the railroad and, as 
a result, the university was for years seriously crippled. 
Ultimately, it parted with the securities in question at a 
considerable loss. The Johns Hopkins Hospital, founded 
at the same time, was endowed with funds variously invested. 
Its resources proved stable, partly because they were wisely 
varied. For a similar reason there should be diversity with 
respect to locaHty. Misfortune sometimes visits one section 
of the country, affecting unfavorably all trades and property 
therein, while leaving other sections untouched. Because 
the field of operation of railroads covers most parts of the 



ENDOWMENT 35 

country, first mortgage railroad bonds have long been con- 
sidered as embodying the chief characteristics of a proper 
investment of college endowment. The bonds usually run 
for a long period, are widely dealt in, and can easily be 
converted into cash. Since the European war the financial 
condition of almost all railroads has been somewhat uncertain, 
so that the railroad first mortgage bond perhaps at present 
is not per se in the highest class. Bonds of public utiHty 
companies were also once much favored as suitable invest- 
ments for college funds. At present many of these companies 
are being subjected to exacting laws as to rates and service, 
which have depressed the value of their securities. Govern- 
ment, state, municipal, county, and district tax-exempt 
bonds now yield a much higher rate of interest than they 
did formerly, and possess all the requirements of a good 
investment. The tax-exemption feature, however, which 
appeals to a private investor is of no advantage to a college 
because of its own tax-exemption privileges. Other things 
being equal, the college should therefore purchase high-grade 
bonds not tax exempt, and benefit by the more favorable 
yield on cost. Preferred stock of well-seasoned industrial 
and other corporations is now coming into favor as a sound 
investment. Where the company has no bonds outstanding 
the stock is secured by all the company's assets. In most 
cases the dividends are cumulative and at a fixed rate. 
Endowments may, to a reasonable extent, be invested in 
choice preferred stocks. 

INVESTMENTS PURCHASED SHOULD BE ENTERED ON THE 

BOOKS AT COST 

Investments of endowment should be entered on the 
books at cost. In this manner the funds can be fuUy and 
accurately accounted for. The following equation should 



36 COLLEGE AND UNIVERSITY FINANCE 

always be maintained: Endowment investments at cost plus 
endowment cash awaiting investment should always equal 
total of endowment. 

One principle must be kept constantly in mind, namely: 
College accoimts should be the record of actual transactions. 
If securities are entered at par value, as is often the case, 
it may be difficult to account fully for endowment funds, 
and the equation given above is not preserved. Some 
colleges which have the habit of carrying securities at par, 
debit or credit college income with the difference between 
par and the price paid for the security. This method is 
not proper because income should not be increased or dimin- 
ished by changes in the principal of investments belonging 
to endowment. All transactions relating to the principal of 
endowment should be kept entirely separate from those 
relating to the current operations of the college, and the cash 
in no wise mingled or combined. Any endowment uninvested 
should always be in cash available for investment. 

Profit realized from the sale of an investment should 
increase the endowment, and loss sustained should diminish 
it. Where endowments are grouped and invested as a whole 
the profits and losses reahzed may be carried in an account 
called 'Trofit and Loss on Investments" and the net profit, 
if any, held for the benefit of all endowments. 

In University investments in bonds and stocks 

are carried on the books at par, and the amount of endow- 
ment changed from time to time so as to conform. Under 
this plan endowments may vary considerably from year to 
year, according as purchases are made at a premium or at a 
discount. This is most confusing, for it is difficult for any- 
one to understand why a fund created this year by a cash 
gift of one hundred thousand dollars should next year be 



ENDOWMENT 37 

shown at one hundred twenty-five thousand dollars, while 
in the succeeding year it may be reported at eighty-five 
thousand dollars, because in the first instance it was invested 
in bonds purchased at a discount, and later it had been thought 
best to change the investment to bonds purchased at a pre- 
mium. The amount of endowment should remain unchanged 
from year to year except as it may be augmented by addi- 
tional gifts or by profits realized from the sale of investments 
or diminished by losses incurred in disposing of them. 

When bonds are bought at a premium provision should 
be made to care for the premium by the maturity of the 
bonds by taking a portion of the interest received each year 
and setting it aside for that purpose.^ 

FUNDS INVESTED SEPARATELY OR AS A WHOLE 

Two principal methods are employed in investing college 
endowment: Every fund may be invested separately; or 
funds may be invested as a whole, each fund sharing in the 
income in the ratio that it bears to the total of the funds. 
Reasons may be given in favor of each plan. Under the 
first, any profit reaHzed on the investments benefits the fimd 
to which they belong, but on the contrary any loss diminishes 
it. If it happen that the investments yield a high rate of 
income the object for which the fund was given receives 
the advantage, while, conversely, if the rate is low it suffers 
the disadvantage. Colleges do not always have freedom to 
choose which of the two methods they shall employ because 
donors sometimes stipulate that the fund given by them 
shall forever be kept separate and separately invested. 
Securities are sometimes given in which the trustees them- 
selves would not invest, though the donor, through his 

1 See p. 73, chapter on accounting. 



38 COLLEGE AND UNIVERSITY FINANCE 

knowledge of the circumstances affecting their value, thinks 
highly of them. It is better to carry such securities in a 
separate account until they are paid or disposed of, and the 
trustees have invested the proceeds in securities of their own 
selection. If any endowment is of considerable size it may 
be invested separately to advantage, but if it is small there 
is greater difficulty in keeping it fuUy invested. 

The second plan, viz., the combination of funds and their 
investment as a whole, has several arguments in its favor. 
In the first place, it obviates the necessity of keeping separate 
accounts and records to show the investments belonging to 
each fund; second, the cash uninvested consists of one sum 
and can be invested more readily; third, each fund receives 
the same rate of income; fourth, the rate of income is less 
likely to vary from year to year because of the amount and 
variety of investments; lastly, each fund is preserved from 
extinction because the losses and gains are divided among 
the funds pro rata, thus assuring the perpetuation of every 
fund unless it should prove that all investments become of 
no value, a contingency in the highest degree improbable. 

From the foregoing it will be apparent that a college whose 
funds are at all numerous may probably use the two plans 
of investment simultaneously — the individual method where 
the conditions of gift or circumstances require it, and the 
group method in the case of all other funds. Under the 
group method care must be taken in including funds estab- 
lished by gifts of property or securities to see that they are 
not estimated at an inflated value; otherwise, the amount 
of a particular fund is unduly increased and the proportion 
of the combined income allotted to it unduly large. Where 
the method of investing endowment as a whole prevails a 
fixed rate of income is often assigned to restricted funds, 



ENDOWMENT 39 

and the residue given to unrestricted funds. This is not an 
equitable arrangement, and as the rate allowed is usually at 
the minimum rather than at the maximum the income of 
restricted funds is diminished for the benefit of the general 
income. Each fund should receive its just proportion of 
the income actually reahzed. 

CONSTANT CARE REQUIRED 

It has already been said that it is difficult to lay down 
rules specifying the particular sort of investment in which 
college trustees should place the funds they hold in trust, 
because the conditions of trade and industry vary so rapidly 
in response to discoveries, new inventions, and changing 
political situations. At best, one may only enunciate the 
general principles to which all investments should conform. 
The responsibility for the prudent investment of funds rests 
upon all the trustees, severally and collectively, and in the 
light of that responsibility they should satisfy themselves 
that every investment meets the requirements.^ In making 
investments they should keep the purpose and safety of the 
trust in mind; they must not be misled by the prospect or 
possibility of some incidental or secondary benefit that 
might ultimately impair the value of the fund itself. For 

example, College had among its assets a certain piece 

of real estate yielding a low rate of income, which, having 
been given without restriction, could be used in any way the 
trustees saw fit. Sometime later the college received a 
bequest of $40,000 for a specific endowment. When the 
executor paid the bequest in cash the college was in need 
of funds to pay its current debts. To meet this need the 

1 Mention is made later of the functions of the Committee on Finance and Invest- 
ment (p. 186). 



40 COLLEGE AND UNIVERSITY FINANCE 

trustees assigned a portion of the land, which they valued at 
$40,000, to the new endowment, and used the $40,000 to 
pay college bills. The procedure was doubtless legal, but 
the testator would probably not have approved it, and for 
good reason, for its only favorable aspect was that it simply 
relieved the trustees of the necessity of raising $40,000. 
Extravagances and recklessness will inevitably occur, if 
such practices are permitted, for administrators will uncon- 
sciously depend on windfalls to rescue them from embarrass- 
ment. To make matters worse, the real estate which the 
college "sold" to the new fund later became non-income- 
producing. Several serious errors of judgment were com- 
mitted: (1) The college should probably not have incurred 
the $40,000 debt; (2) if the debt was unavoidable, independ- 
ent measures should have been taken to raise the money 
needed to discharge it; (3) the land should have been held 
as a general asset and should have been disposed of at the 
proper time, the sum received then being invested on the 
principles enunciated above; (4) the cash bequest should 
have been treated as inviolable, should have been conserva- 
tively invested, and so preserved as income-producing 
endowment. 

Nor do the responsibilities of the trustees end when 
investments are made. It is their duty to be on the watch 
constantly to detect any circumstances or causes which 
might affect their value. As soon as they detect anything 
which in their judgment may unfavorably affect the final 
value of an investment they should take such action as the 
situation demands. So long as there is no question about the 
ultimate payment of the security, and so long as the interest 
is paid regularly, the trustees are not particularly concerned 
with changing market value. But they should be much 



ENDOWMENT 41 

concerned if the fall in market value forecasts a permanent 
decrease in the value of the security and its abihty to con- 
tinue to pay interest. Trustees too often feel that their duty 
is finished when they have made an investment, and there- 
after give httle or no thought to it unless through the 
suspension of interest or dividends, or some other untoward 
happening, their attention is forcibly turned in that direction. 
This laissez-faire policy is also encouraged by the opinion 
prevalent that if trustees change investments frequently 
they may be accused of using the college funds for speculative 
gain. There is a fundamental distinction between disposing 
of securities for prudential reasons and selling them in the 
hope of profiting by variations in market value. The former 
is sensible, the latter reprehensible. 

Trustees are often restrained from selling securities 
whose value is decreasing because of the resulting shrinkage 
in endowment. It frequently happens that securities pay 
interest for some time at least after serious depreciation in 
value has occurred, a fact which may give rise to the hope 
that their former value may be restored and the necessity 
of taking the loss prevented. Trustees, however, should 
observe the first signs of depreciation and consider whether 
it is better to dispose of the security promptly and take the 
loss, or continue to hold it. 

REPORTS TO TRUSTEES ON CONDITION OF SECURITIES 

To enable trustees to keep in touch with the situation 
with regard to the investment of endowment funds it is a 
good plan for the administrative officers to send them 
j frequent reports, at least as often as once in three months, 
showing in parallel columns the securities owned, their cost, 
the present market value, the market value a year ago, the 



42 COLLEGE AND UNIVERSITY FINANCE 

amount of increase or decrease in present market value as 
compared with cost, and the income yield on present market 
value. If the reasons for change in value are known they 
should be given in a column headed "Remarks." Reports 
of a similar kind should be made regarding real estate 
mortgages and other investments which are not listed in 
market reports. In the case of real estate and farm mort- 
gages the report might give a list of all those which are 
overdue^ or on which interest is unpaid, and the location of 
the property mortgaged, together with a report of the amount 
of mortgages on other property in the same locality which 
the college holds. The information thus furnished would be 
helpful to the trustees in determining whether they should 
make more loans on property in those localities. The 
status of real estate owned might be disclosed by reports 
showing the gross rental, the cost of operation, and the net 
return as compared with those of previous years. A series 
of reports made on these principles ought to be of assistance 
to the trustees in enabling them to safeguard endowment 
and to assure to the college a steady income as large as is 
consistent with safety. 

ENDOWMENT FUNDS SHOULD NOT BE LOANED TO 
TRUSTEES AND OFFICERS 

From the point of view of policy and good business 
procedure endowment funds should not be loaned to any 
trustee, officer, or employee of the college, nor to any business 
which they own, nor to any corporation for whose manage- 
ment they are responsible. Neither should any loan be 
made to any person upon the guarantee of a trustee, officer, 
or employee. If the college charter does not prohibit this 
practice it should be forbidden by the by-laws or by resolu- 



ENDOWMENT 43 

tion of the board. The estabHshment of this principle 
strengthens the hands of the trustees and avoids embarrass- 
ment which might arise through the request for such loans. 
The reason for this is quite apparent for if, through mis- 
fortime or otherwise, the interest on such loans becomes 
delinquent, or the loans themselves are not paid at maturity, 
the trustees of the college are placed in the position of having 
to enforce collection against their own officers, which they 

might be very reluctant to imdertake. The trustees of 

College, through its finance and investment committee, 
had made several loans secured by municipal bonds, taken 
at par, to one of its own trustees. When the matter came 
imder observation of the author the market value of the 
bonds was less than the par value. The hands of the 
college were tied; it could neither sell the bonds nor very 
well ask for additional security. 

UNDESIRABILITY OF INVESTING ENDOWMENT IN COLLEGE 
BUILDINGS AND LAND 

Endowed colleges sometimes use endowment funds to con- 
struct buildings, especially dormitories, and to purchase addi- 
tional land for campus. In so far as the expenditures have 
been made for campus, for recitation buildings, laboratories, 
and Hbraries, which are in themselves non-productive, endow- 
ment is destroyed in order that provision may be made for 
what seems to be an exigent need of the college. Campus, lab- 
oratories, libraries, recitation buildings are not endowment, and 
funds so invested simply cease to be endowment, for they produce 
no money income. In some cases where the funds are 
expended for non-productive college buildings and land, the 
trustees try to keep up appearances by charging current 
expenses of the college with the customary rate of interest 



44 COLLEGE AND UNIVERSITY FINANCE 

on the sum used, and crediting endowment income. This 
course is nothing but jugghng. The investment in question 
does not earn interest; hence the amount of the interest 
credited to the endowment must come from some other 
source. The fact is that the college income is reduced to the 
extent of the interest on the sum used to construct the build- 
ing or buy the land, and administrative morale has been 
impaired by the use of subterfuge. 

The use of endowment for building dormitories may seem 
on first thought to be justified on the theory that they may 
confer a double benefit on the college, first, by producing 
income, and second, by providing accommodations for 
students who pay tuition. As has been said before, inci- 
dental or secondary benefit resulting to a college from 
investments of endowment funds should not be the con- 
trolling motive, and the same exacting tests should be 
appHed to an investment in dormitories as to any other 
endowment investment, namely: Will the permanency of 
the principal be conserved, and will the rate of income be 
as high and regular as from a high-grade investment ? The 
rate of income on dormitories given in college reports is not 
the actual rate in many instances. Many of the expenses 
incurred in their maintenance and management are included 
in the general expenses of the college instead of being charged 
to the operation of the dormitories. Provision is rarely 
made for depreciation to provide a fund for the replacement 
of the principal invested, which must be returned intact to 
endowment when the building is worn out if the permanency 

of endowment is to be secured. Thus, University 

had by permission of the donor used hbrary endowment to 
build dormitories on the understanding that 6 per cent per 
annum on the sum expended should be credited to library 



ENDOWMENT 45 

income. In arriving at the income available for this purpose 
no charge was made for heat and Hght (because it came from 
the central power plant) and no charge was made to provide 
a fimd for replacement of principal. 

Carefully prepared statements have been made by a few 
institutions showing the results of operation of their dormi- 
tories for a period of years, including among the expenses all 
current charges, as well as a reserve for replacement of 
principal. These reports show that the average return is a 
little over 3 per cent. For a few years after the dormitories 
were built their net income was large because few repairs 
were needed, but as the buildings became older the amount 
needed for repairs became much greater. It would thus 
seem that judging the matter on its merits as an investment, 
dormitories do not possess the requisite qualifications. As 
to the incidental benefit which may arise from an increase in 
attendance, it is well to keep in mind the following principle 
regarding college endowment: College endowment should he 
invested in such a manner that income on the investments shall 
in no wise he affected hy the operation of the college, nor hy any 
circumstances relating thereto. If the college revenue is di- 
minished through a smaller attendance there is then greater 
need of income from endowment. If attendance diminishes, 
dormitories may have to be kept open at a loss, and pre- 
cisely at the time when the college is in need of more rather 
than less income from endowment. The college cannot sell 
its dormitories if they become unprofitable, nor dispose of its 
buildings while it is a going concern. But if it had invested 
in securities it could readily change the form of invest- 
ments.^ 

*See pp. 33-34. Objections to investments in property devoted to a special 
purpose, not readily merchantable. 



46 COLLEGE AND UNIVERSITY FINANCE 

For various reasons, therefore, the investment of endow- 
ment in college campus and buildings, even dormitories, 
is unwise. 

HYPOTHECATION OF ENDOWMENT INVESTMENTS 

Still another misuse of endowment is encountered from 
time to time, viz., the pledging of endowment investments 
as security for loans for the current expenditures of the 
college. Trustees who would repudiate scornfully the sugges- 
tion of using college endowment, even temporarily, to pay 
current debts, have at times authorized its use as collateral 
for loans for current purposes, apparently overlooking the 
fact that by so doing they have parted temporarily with the 
securities, and can regain them only by raising money to 
repay the loan. If they fail to redeem the collateral from 
the bank they have just as truly used endowment funds for 
current expenses as if they had sold the securities and used 
the cash. 

If the question of legality were raised it would probably 
be found that a trust fund, such as endowment, created with 
the understanding that the principal shall be maintained 
inviolate and the income only used, could not be put in 
jeopardy for any purpose not connected with the preservation 
of the principal of the trust. Examples of using endowment 
investments as collateral for loans for the needs of colleges 
are unfortunately too numerous and are made even in defi- 
ance of the provisions of the charter and by-laws. 

College, some years ago, had prohibited by resolution the use 
of any endowment assets as collateral. Notwithstanding 
that prohibition, it later authorized the treasurer by formal 
resolution to pledge as collateral any security which the 
college possessed. The treasurer accordingly used Liberty 



ENDOWMENT 47 

bonds belonging to endowment. The charter of 



University states that endowment investments must not be 
hypothecated. Nevertheless, nearly three-fourths of its 
endowment was quite recently so used. This institution is 
therefore practically bankrupt. The enormity of the offense 
does not, however, depend upon the size of the amount. 
Endowment being inviolable, not a single bond or share of 
stock must ever be hypothecated for the purpose of paying 
any bill whatsoever, be the college little or big. And there 
is sound practical sense, as well as sound law and ethics, 
in this inflexible position, for when once a small block of 
stock has been hypothecated and redeemed it is easy to 
increase the scale of the transaction. Ultimately, hypothe- 
cation is resorted to in order to enable the institution to 
undertake ambitious work that it cannot afford, in the hope 
that some benefactor may be found to endow it. Financing 
of this kind inevitably ends in disaster. "Once endowment, 
always endowment'^ is again the only safe, as it is the only 
legitimate, and the only ethical principle. 

FLOATING DEBT 

The income from unrestricted endowment may be used 
for any of the legitimate expenses of the college, but where 
colleges have accumulated floating debts through deficits 
from operation, and are carrying them by bank loans, 
usually at a high rate of interest, a corresponding amount 
of endowment income is absorbed in paying the interest, 
and its use for ordinary expenses prevented. College 
deficits, like rolling snowballs, tend to increase. The larger 
they are, the larger is the amount of current income required 
to pay interest on them, and the smaller is the sum available 
for current operations, with the result that a larger deficit 



48 COLLEGE AND UNIVERSITY FINANCE 

occurs, which in turn increases the floating debt, and so 
the vicious circle is enlarged. Some college administrators 
have held that a debt is a beneficial thing because it acts as a 
stimulus in encouraging friends to make donations. It may 
possibly stimulate officers to greater activity in seeking gifts, 
but the person who likes to pay old debts is rarely found. 
People of means and of sound business judgment much 
prefer to give money in advance of its expenditure, while 
they have some choice in the matter. The budget system, 
which will be described in chapter vi is designed to enable 
a college to bring its income and expenditures into harmony. 
In the absence of a budget system colleges often spend more 
than their income, gradually accumulating a heavy burden 
of debt, which, in effect, renders a corresponding amount of 
endowment of no avail for constructive work. An example 

of how endowment is nullified is furnished by College, 

which, in 1918, obtained subscriptions to pay off its debts, 
but while the pledges were being collected it accumulated 
another debt of nearly $200,000. It must now start a cam- 
paign to clear away the new debt. While this is being done 
still another debt will probably be created, if the experiences 
of the college are repeated. The institution should under- 
take to raise a sum to capitalize the debt, and a further 
amount, payable in two or three years, to pay off its indebt- 
edness and to care for any deficit that might arise while the 
endowment was being collected. When completely out of 
debt it should refuse to spend more than its income. 

Another illustration is furnished by University, 

whose floating debt equals the amount of its endowment, 
and whose interest absorbs all of the endowment income. 
Moreover, it is running behind regularly, and constantly 
adding to its already large debt. If money is raised to pay 



ENDOWMENT 49 

the debt, the income from endowment once more becomes 
operative, but the pohcy is reprehensible. Colleges will do 
well to restrict their operations to such activities as they 
can afford. Even then they may occasionally have a defi- 
cit at the end of the year, but this will be small and should 
be promptly cared for and not allowed to remain and increase 
until it becomes a menace to the security of the institution. 

USE OF ENDOWMENT CASH FOR CURRENT EXPENSES 

An even more insidious use of endowment for current 
expense arises from the custom which prevails in some colleges 
of keeping endowment cash and current account cash in one 
bank account and drawing on it for the needs of the college 
as they arise. If any cash belonging to endowment is on 
hand awaiting investment, and there is none belonging to 
current account available for meeting the monthly pay-roll, or 
some other urgent current expense, the endowment cash is used 
automatically through the issuance of regular checks, and 
the investment of the endowment cash necessarily postponed 
until such time as the current account is in funds. Inasmuch 
as many colleges regularly run in debt from current opera- 
tions, the date of replacement of endowment cash is almost 
indefinitely postponed or deferred until by gifts or special 
efforts the deficit is raised. Where endowment cash is 
used the trustees sometimes go through the motion of being 
"fair'^ to endowment income by crediting interest on the 
sum used. This action on their part leaves the situation 
just as it was before if the endowment used is general, 
because the same sum is charged to expense and credited to 
income. But if it is restricted, allowing interest on it adds 
to the deficit and absorbs so much more endowment cash 
to care for it. 



50 COLLEGE AND UNIVERSITY FINANCE 

By pledging endowment assets as collateral for current 
loans and using endowment cash to pay current bills, the 

entire endowment of College was exhausted and its 

doors closed, and many other colleges have been brought 
perilously near the same fate. Cash belonging to endowment 
should be kept separate and distinct from current cash, and 
should not be deposited in the same bank account. This 
plan keeps any endowment cash uninvested available for 
investment as soon as a suitable one is found, and prevents 
its use for current debts, unless the authorities of the college 
use it deliberately, which they have no moral or legal right 
to do. 

FUNDS SUBJECT TO ANNUITY 

Colleges often receive for endowment sums subject to 
the payment of an annuity during the lives of one or more 
persons. Such funds and their investments should be kept 
separate and not included in the endowment of the institution 
until after the death of the annuitants, when it may be deter- 
mined how much of the sum received really constitutes a 
gift to endowment. The college should make as careful 
provision for the rights of the annuitants as the law requires 
of companies dealing in annuities. Funds subject to annuity 
should not be invested in the buildings of the college; in fact 
the rule with regard to investment of endowments, described 
on page 45, applies with greater force, if possible, to annuity 
funds. Before accepting gifts subject to annuity the college 
should make sure that they can be carried without decreas- 
ing the current income of the college. This rule may require 
a working fund, which may be created by assigning a ma- 
tured, unrestricted legacy or annuity, or by building up a 
reserve from surplus annuity income. The education of the 



ENDOWMENT 51 

present generation is the immediate duty of the college, and 
it is not justified in falling short of its utmost effort in that 
respect in order that it may provide more liberally for future 
generations. 

TREATMENT OF PLEDGES 

Pledges and subscriptions to endowment are not endowment 
until they are actually paid; therefore, they should not be 
included in it. Endowment is a reality, not a potentiality; 
pledges and subscriptions are potentialities. The amount re- 
ported as endowment should normally increase, but if uncol- 
lected pledges were included in endowment, and later those 
found to be of no value taken out, the opposite condition 
might arise. A careful account of pledges and subscriptions to 
endowment should of course be kept. But it is better to 
keep a special record for this purpose. As subscriptions are 
received they should be entered in a book in numerical order, 
giving the names and addresses of the donors, and the amount 
and conditions of payment of each pledge. The pledge card 
may be so designed that it can be used as a ledger card and 
filed alphabetically. As payments are received the details 
may be kept in a special cash book and the totals transferred 
to the main cash book. From these records the total 
amount pledged, the sum paid, and the remainder unpaid 
may be learned at any time. 

PROCEDURE TO BE OBSERVED IN MAKING INVESTMENTS 

Whatever the special duties of the finance committee 
of the college, the proper investment of endowment is a 
responsibiHty resting on every trustee. As a matter of 
actual practice, it is often difficult and inexpedient to call 
the trustees together to pass upon each investment proposed. 



52 COLLEGE AND UNIVERSITY FINANCE 

Therefore, the plan of appointing a standing committee of 
the board, composed of three or more members, who can 
attend meetings readily, and whose duty it is to pass upon 
the sale and purchase of investments, is a sensible one. 
The committee should keep full minutes of all its meetings, 
and after each meeting should send promptly a copy of the 
minutes to each member of the board for his information. 
At the next regular meeting of the board it should also report 
its actions for ratification. Every trustee should realize 
that while for the sake of convenience and expedition the 
committee on investment is charged with the special duty of 
selecting suitable investments and of recommending the 
disposal of unsuitable ones, the responsibility of each member 
of the board with respect to the trust funds of the college 
is in no wise diminished thereby. Moreover, the judgment 
and knowledge of the whole board are in the long run better 
than that of a few members. 

CUSTODY OF SECUEITIES 

Securites should be carefully safeguarded. They should 
be kept in a safety deposit vault, and access to them should 
never be had by fewer than two persons together. A copy 
of the by-law providing for access to the securities should 
be filed with the officers of the safety deposit company, 
who should be required to see that its provisions are rigidly 
observed, and should be held accountable for their observ- 
ance. The persons permitted access should be persons 
specifically designated by the board of trustees. The 
treasurer or his representative should always be present. 
A record of the securities and documents to be deposited or 
withdrawn should be made, and a copy of it, signed by the 
persons present, placed on file. Under no circumstances 



ENDOWMENT 53 

should one person alone have access to the securities, a 
custom which is now followed in many of the smaller endowed 
colleges. It is desirable to establish and maintain good 
practice even when the amount involved is but small. 

Some colleges employ as custodian of their securities a 
bank or trust company, which also collects the principal 
and interest and remits them to the college. In such cases 
the financial responsibility of the custodian should be care- 
fully investigated and the relation its own assets bear to 
the amount of securities deposited by the college. The 
supervision which it receives from the state or federal 
authorities should also be a factor in its selection. The 
trustees should at any time make such count and audit of 
the securities of the college as seems best to them, but in 
addition to such examinations, they should employ a pubhc 
accountant to make an annual audit and inspection, and 
should pubhsh the result of his examination in the treasurer's 
annual report. 



CHAPTER V 
PHYSICAL PLANT 

Land, buildings, and equipment acquired and used for 
academic purposes by an endowed college come next in 
importance. Since the European war the high cost of labor 
and material has rendered the maintenance and extension of 
these facilities a serious question. How a college can keep 
its buildings and campus clean and attractive and in a good 
state of repair without devoting too large a portion of its 
income to that purpose is a problem vexing the minds of 
many a college administrator. There is some danger that 
of the total income of an institution too large a proportion 
nowadays goes to maintenance, too small a proportion to 
teachers' salaries. Colleges might well construct a curve 
showing over a period of years the relative proportions of 
total income that are devoted to (1) instruction, (2) main- 
tenance and upkeep, and (3) administration. A graphic repre- 
sentation, kept up to date, would probably not be without 
influence on their policy. The graph on page 55 shows con- 
ditions over a period of ten years at a well-known institution. 
It is obvious at a glance that while the percentage of income 
absorbed by upkeep is increasing, that devoted to payment 
for instruction is decreasing. 

DEFINITION 

The physical plant consists of the land used for campus, 
with its improvements, and the buildings, together with 
their furniture and equipment, books, scientific apparatus, 
machinery, and tools. 

54 



PHYSICAL PLANT 



55 



PLANT TO BE CARRIED AT COST 

College plant should be carried on the books at cost, and 
the amount thus carried should equal and account in detail 
for all funds used in acquiring it. Since college accounts 
should be the actual record of gifts, endowments, and all 
other receipts and their use, the wisdom of carrying ''phriiV^ 

Graph Showing Relative Proportions of Income for Current Pur- 
poses Devoted to: 

1. Instructional Salaries 

2. Maintenance and Upkeep 

3. Administration 

Per Cent 

of Income 

60 



50 
40 
30 
20 
10 





Fiscal U909 10 


11 


12 


13 


14 


15 


16 


17 


18 


Year /1910 11 


12 


13 


14 


15 


16 


17 


18 


19 



at actual cost is apparent, and the custom which sometimes 
prevails of carrying it at an estimated value is to be depre- 
cated. In case any of the plant were offered for sale, the 
price placed upon it would depend largely upon what could be 
obtained for it, and not upon the value given on the books. 
Therefore, to carry it at cost is the logical method. College 
plant, in the course of time, often increases in value, and 
there may be something gained in the way of information 



56 COLLEGE AND UNIVERSITY FINANCE 

by occasionally having it revalued and the estimated value 
shown in a footnote in the college financial report. 

A complete record or inventory containing a description 
of the physical plant should be kept and revised annually 
so as to include all additions and ehminate deductions. 
This record should indicate when the various items were 
acquired and their cost. The cost should of course accord 
with the ledger accounts. 

INSURABLE VALUE 

The cost of buildings and equipment may be, and usually 
is, quite distinct from theirinsurable value. During the recent 
period of high prices of building material and labor, insurance 
needed on college buildings and equipment was naturally 
far in excess of their original cost, and the fluctuating 
character of the inventory value of buildings and equipment 
reflected this condition. Fire and tornado insurance should 
be based on inventory value if the college is to be protected 
properly against losses, a value which might differ materially 
from the book values. The inventory value should represent 
the cost of reproduction in identical condition, or, in other 
words, the cost on that date less depreciation. 

DEPRECIATION 

All buildings and equipment depreciate and wear out 
in course of time. In a going concern, plant and equipment 
necessary for its operation must be replaced when worn 
out or useless. In profit-making corporations funds for 
replacements are provided by setting aside a sum annually 
from income. As colleges are not being operated for profit, 
the same considerations for providing for replacement of 
buildings and equipment from income do not apply to them. 



r^ 



PHYSICAL PLANT 57 

Endowed colleges in the first instance have obtained funds 
for plant and equipment by gifts, and as a general rule 
their trustees consider it the better poHcy to rely upon the 
same source for any buildings and equipment which may be 
needed in the future. They are, moreover, so beset with 
difficulty in procuring income sufficient for the present needs 
that they are not interested in raising funds for needs of the 
distant future. As the present and past generations have 
provided the existing buildings, it is neither unwise nor 
unfair to expect future generations to do as well. 

In some colleges journal entries are made to show the 
estimated amount of depreciation in buildings and equip- 
ment, but a sum to provide for it is not set aside from 
income. They are, therefore, book entries only. Unless 
the trustees adopt as their policy the plan of providing from 
annual income a sum equal to the amount of estimated 
depreciation, and set it aside regularly and invest it so as to 
provide an adequate amount when needed, the entries are 
of no real value and may complicate the accounts. So long as 
the plant serves the purposes of the college effectively its 
present value is of little consequence, but there is real 
information and accounting value in keeping the plant on 
the books at cost. Any item sold or destroyed should be 
taken off the books so that only property actually in the 
possession of the college should be included in the plant 
assets. 



CHAPTER VI 

ACCOUNTING 

The accounting system of a college should be designed 
to meet the needs, conditions, and ideals which have been 
set forth in the preceding chapters. It is necessary that the 
accountant understand the nature and purpose of a college, 
what its peculiar characteristics are, and how they differ 
from those of a commercial or manufacturing corporation. 
Failure to recognize the fundamental differences between a 
college and a corporation organized for profit has often led 
to the imposition on the college of an accounting system 
suited to a business organization. A business corporation 
is established for the sole purpose of making a profit on the 
money invested. For that reason its accounts must be kept 
so that profit or loss may be determined, e.g., proper allow- 
ance must be made for depreciation of plant, for bad debts, 
for income accrued, and for accounts unpaid — otherwise, the 
financial situation cannot be correctly exhibited. Accurate 
distinction must be made between capital expenditures and 
those for current operation. In the accounting system of a 
college, since it is not organized for profit, accounting prin- 
ciples and practices specially designed to determine profit or 
loss are out of place. 

ACCOUNTING FOR FUNDS 

What are the characteristics of the endowed college 
which must be kept in mind in framing its accounting system ? 
First, and most prominent, is the fact that it is not a profit- 

58 



ACCOUNTING 59 

making corporation and that a part of its income is derived 
from endowment. Its accounting system must therefore be 
designed for trust accounts. There must be an accurate 
record of each trust, showing its origin, its financial history, 
its present condition, and the manner in which the trust is 
being executed. Tinist funds should therefore be kept apart 
from all other funds and operations of the college, their 
accounts segregated in a special ledger, and their cash 
deposited in a separate bank account. Three ledger accounts 
are needed: one with the fund, one with the investment of 
the fund, and a third with the income of the fund. Invest- 
ments should be entered at cost so that at all times the 
debit to investment account, plus cash uninvested, equal 
the credit to the fund. If the amounts invested in bonds, 
stocks, real estate mortgages, or real estate, are needed for 
informational purposes the ledger account with the invest- 
ment of the fund may be subdivided accordingly. A Hst of 
investments should be maintained, preferably on cards, 
giving particulars of each investment, its cost, rate of income, 
date of maturity, face or par value, interest payment dates, 
and, if a mortgage, the property mortgaged. The Hst should 
be kept up to date at all times by eliminating cards for 
investments paid, and by inserting cards for investments 
made. The totals of the cost must be in agreement with the 
ledger. Before the end of each month a Hst of interest and 
principal due during the coming month should be taken 
from the cards so that collections may be made promptly 
and accurately. 

If the funds are invested as a group instead of individually 
the only difference in treatment from the foregoing is that 
while a similar ledger account must be kept for each of 
the funds separately, only one main account with their 



60 COLLEGE AND UNIVERSITY FINANCE 

combined investment is needed. In such a case the debit to 
investments, plus the cash on hand, should equal the sum 
of the credit balances to all the funds. 

At stated times, or as soon as it is received, the income 
on endowment investments should be paid to the current 
account of the college, to be used in accordance with the 
conditions attached to the respective funds. For con- 
venience' sake, however, the ledger accounts with income 
may be kept in the current ledger, and the income as received 
deposited at once in the current bank account. 

RECORD OF FUNDS 

Endowments are trust funds and should be handled and 
cared for in accordance with the conditions of the trust. 
So the accounting records must be full and explicit that the 
administrators may always know exactly what is required. 
The ordinary routine with respect to a gift for endowment 
is somewhat as follows : 

■ The president of the college reports to the board of 
trustees that a friend offers a gift for endowment for a certain 
purpose, with certain conditions. If the purpose and condi- 
tions are acceptable to the college the board passes a resolu- 
tion formally accepting the gift with its conditions, and the 
president is authorized to acquaint the prospective donor 
with the action. If some modification is desired in the terms 
of the proposed gift that fact is communicated to the donor, 
and if he consents to the suggestion and modifies the 
terms, the trustees then, by formal resolution, accept the 
gift. The minutes of the board of trustees should contain 
the correspondence respecting the gift in full and should 
recite its terms and conditions and the resolution of accept- 
ance. When the gift is paid, a full descriptive entry should 



ACCOUNTING 61 

be made on the financial books, enumerating its conditions 
and purpose, and referring by book and pages to the minutes 
of the board for complete particulars. If the gift were paid 
in cash the entry would appear on the cash book, and if it 
were paid in securities or property the entry would be made 
in the journal. The correspondence and all the original 
documents should be filed away in safety and made 
easy of access. It is exceedingly important that the history 
and conditions of each endowment fund be given so that 
succeeding generations of college administrators may, with 
full knowledge and understanding, execute the trust properly. 
At present the records of endowed colleges are probably 
more deficient in this respect than in any other. A short 
time ago the treasurer of a college in the Middle West 
remarked that he was going through the archives of the 
college for the purpose of finding out if possible how the funds 
of the college originated and what conditions were attached 
to them. He was also consulting with the '' oldest inhabit- 
ants" of the college community to learn what they could 
contribute to the subject. He was embodying the results of 
his labors in the college records so that future administrators 
would have in convenient form all the information which he 
had obtained. The researches made by this officer are 
typical of what is being done at many of the older institutions. 

FUNDS FOR SPECIAL PURPOSES 

The next point to be noted with regard to the accounting 
needs of an endowed college is that certain funds are given 
to it for special purposes, the principal of which, under 
certain conditions, as well as the income, may be used. 
These funds should also be kept apart from the general 
accounts in order that they may be strictly accounted for 



62 COLLEGE AND UNIVERSITY FINANCE 

and applied in accordance with the terms of the gifts. The 
ledger accounts needed are the following : one showing the 
amount of each fund ; one giving the expenditures on behalf 
of each fund; one with the investment of each fund, unless 
invested as a group (if any of it is temporarily invested); 
and the fourth, an account with income. The debit to 
investment, plus the debit to expenditures, plus cash on 
hand, should always equal the credit to the fund plus the 
credit to income. Any uninvested principal and income 
should always be represented by cash actually on hand. 
Where the number of endowment funds and funds for special 
purposes is not too numerous they may all be kept in one 
ledger and the cash deposited in one bank account. If this 
plan is followed a daily report should be made showing the 
amount of cash on hand belonging to each fund. The same 
scrupulous care is required in recording the history and 
conditions of funds for special purposes as is needed for those 
of endowment funds. 

Where it is the custom of the college to invest its funds 
as a whole, endowment funds should be invested in one 
group and those for special purposes in another, because a 
different set of considerations should determine the invest- 
ments for each group. Investments in the latter group are 
temporary, the object being so to invest the funds as to get 
as favorable a rate of interest as is prudent until the funds 
are needed, and at the same time to provide for realizing 
the principal promptly without loss as soon as required. To 
meet these conditions choice is limited to investments such 
as certificates of deposit, treasury notes, short-term bonds, 
and the like, whose rate of interest may be comparatively 
low. But as speedy realization on principal is not a necessity 
in case of endowment investments, investments running for 



ACCOUNTING 63 

a longer period are suitable. If the investments of both 
groups were merged and the income divided on a pro rata 
basis, the plan might not operate with equal justice. 

Cash transactions of endowment funds and their invest- 
ments, and of funds for special purposes, may be kept to 
best advantage in a special cash book. However, they may 
be kept in the cash book used for current accounts by using 
columns to separate these transactions from those for other 
purposes, but the cash belonging to them should always be 
deposited in a separate bank account. 

For ready reference a special file or folder of the several 
endowment funds and funds for special purposes is very 
convenient if arranged in alphabetical order, reciting the 
letters of gift and the conditions in full, and referring by 
page and number to the minute books in which they were 
originally recorded. 

Thus, the first requirement of an accounting system of 
an endowed college is provision for a strict and accurate 
record of its endowment funds, and of its funds for special 
purposes. 

ACCOUNTING FOR PLANT 

The second characteristic of college accounting is the 
peculiar relation which the educational plant and equipment 
bears to the enterprise. To replace its educational buildings 
by setting aside annually a fund from income for that 
purpose is at present not the policy of an endowed college. 
Therefore, there is no occasion to make journal entries 
charging income with the estimated amount of depreciation 
which is not met by annual repairs. The accounts should 
show the money which has been expended for the purchase 
of land and for erecting, furnishing, and equipping the build^ 
ings. These ledger accounts should not be changed except 



64 COLLEGE AND UNIVERSITY FINANCE 

to record purchases of more land and the cost of erecting, 
furnishing, and equipping more buildings, or for the extension, 
improvement, or obliteration of the present ones. For a 
college, with its campus and buildings completed, the ledger 
accounts needed are: "Land," the debit balance of which 
should be the amount paid for campus, or its value when 
donated; one with "Buildings," showing the amount 
expended for their erection; one with "Furniture," and 
another with "Equipment," each showing the actual cost. 
These ledger accounts should be supported and explained by 
journal entries or statements giving in detail the amount 
spent for each of the above objects. The debit balances of 
these ledger accounts should be equaled by the credit balance 
of a ledger account entitled "Plant Capital," which should 
represent the total of the gifts, grants, and appropriations 
received and made for the acquisition of the land, buildings, 
furniture, and equipment. In many instances the early 
records of colleges are defective and it is difficult, if not 
impossible, to ascertain the original cost of plant and equip- 
ment. Where such a condition prevails it is necessary to 
enter the cost at an estimated or appraised value, but there- 
after all new buildings and their equipment and any land 
acquired should be entered at actual cost. 

ACCOUNTING FOR BUILDINGS IN COURSE OF 
CONSTRUCTION 

The buildings of an endowed college are usually provided 
for by gifts. The accounts should show the exact amount 
of the gifts and their application. Since the sum of money 
available for the purpose is ordinarily limited in amount, 
exact plans and careful estimates of cost, together with 
actual contract propositions, should be obtained before the 



ACCOUNTING 65 

work is undertaken. If the total cost equals or falls within 
the amount of gift the work may be authorized, but if it 
does not it should be postponed until the cost is reduced by 
modifications in the plans or until additional funds can be 
secured. When the gift is received it should be credited to 
a specific building account under the name of the proposed 

building and called " (Name) Building Fund/' and 

included as a building fund among the funds for "Special 
Purposes."^ As expenditures for the building are made 
they should be charged to " (Name) Building Con- 
struction." The amount by which the credit balance to 
the fund exceeds the debit balance to the construction 
account would be the amount unexpended, and should be 
found in cash or in temporary investments. But if the fund 
were overexpended the simi by which the construction 
account exceeds the fund would represent the overdraft. 
Separate ledger accounts should be kept with the furniture 
and the equipment of the building, and with the funds or 
appropriations provided for them. When the building is 
completed, furnished, and equipped the special ledger 
accounts with construction, furniture, and equipment should 
be closed into the property accounts, "Buildings," "Furni- 
ture," and "Equipment" respectively, and the ledger 
accounts with the funds, if the funds are exhausted, closed 
into the account "Plant Capital" — there to remain with- 
out change until the building is demoUshed, destroyed, or 
enlarged. If the funds are greater than the actual require- 
ments the excess should be refunded to the donor, or, with 
his approval, devoted to some other purpose. 

If it should happen that the fund for building cannot be 
used promptly it may be advisable to invest it temporarily 

» See p. 61. 



66 COLLEGE AND UNIVERSITY FINANCE 

in readily negotiable securities, adding any interest received 
to the fund. The accounting treatment then should conform 
to that prescribed for ''Funds for Special Purposes."^ 

The question is often raised: If the ledger accounts 
show the original cost of buildings, furniture, and equipment, 
and are not modified to conform to changing values, would 
it not be difficult to establish an insurable value? The 
answer to this question may be found in the chapter on 
"Plant."2 

When once the buildings are erected, fully furnished 
and equipped, the burden of keeping them in condition 
is an expense of current operation, which must be met from 
current income. Its accounting treatment will therefore be 
described in the paragraphs relating to that division of col- 
lege accounting. 

ACCOUNTING FOR CURRENT OPERATIONS 

The third group of financial transactions for which the 
accounting system of an endowed college must provide 
embraces all the current operations of the college. In this 
group are included all transactions not accounted for under 
''funds" and "plant." The combined result of the opera- 
tions in this section is expressed by the total amount of 
surplus or deficit for the year. For the purposes of adminis- 
tration, however, the accounts should be so designed and 
kept that the trustees may know what each division of the 
college forming an operating unit contributed to the result. 
Therefore, operating accounts should be provided for each 
of the classes after the manner enumerated in the chapter 
on "Disbursements, "^ namely: (1) for the operating receipts 

1 See p. 61. 

2 See p. 56, "Insurable Value." ' 

3 See p. 19. 



ACCOUNTING 67 

and disbursements for strictly educational purposes; (2) for 
the operating receipts and disbursements of auxiliary 
departments; (3) for the operating income and expenditures 
of the diniDg-halls, dormitories, bookstore, and similar 
departments and activities; (4) for sundry receipts and 
disbursements of a general natiu-e not iacluded in the first 
three classes. 

THE BUDGET 

The budget method is best adapted to account for and 
control the operating receipts and disbursements for strictly 
educational purposes. The educational work of a college 
ought to be limited by the income at its disposal. Its 
opportunities are usually unKmited. If it conducts its 
financial administration on the basis of its opportunities, 
without reference to its limitations of income, financial 
disaster is inevitable. But no college is under any obHgation 
to undertake to render a service for which it cannot pay. 
ReaUzing the importance or the necessity of a demand, the 
college may fairly appeal for funds to meet it, but if the funds 
are not forthcoming, the college has no right to incur debt 
either by borrowing money or by hypothecating inviolable 
securities. It would not be fair to create the impression 
that all colleges have erred in this matter; stiU unwisdom 
of this type is not rare. 

The budget system of control was designed to assist 
governments and iastitutions in restricting their expenditures 
to their income. In the case of a college it consists of two 
parts: one part containing the estimated income; the other 
containing the appropriations for the estimated expenditures. 

A classification of income as to soiu"ces must first be made, 
and then a careful estimate of the amount of income which 



U 



68 COLLEGE AND UNIVERSITY FINANCE 

may be expected from each source. For a college of liberal 
arts the following classification of income is suitable: 

BUDGET INCOME 

A. For strictly educational purposes 
I. From student fees 

1. Matriculation 

2. Tuition 

3. Graduation 

4. Laboratory 

5. Incidental 

6. Library fees and fines 

7. Locker 

8. Miscellaneous 

11. From endowment investments 

1. Income for general purposes, unrestricted 

2. Income for general purposes, restricted 

a) President (Laing Fund) 

b) Maintenance of buildings 

(1) Science Hall 

(2) Observatory 

c) Professorial chairs 

(1) Latin— EUery Fund 

(2) Mathematics — Hannan Fund 

III. From gifts and grants 

1. For general purposes, unrestricted 

a) From North West Synod 

b) From Alumni Association 

2. For general purposes, restricted 

a) From George Walker, for books for English Depart- 
ment 

b) Etc. 

IV. From miscellaneous sources 

1. Rentals of college buildings 

2. Sale of old materials and equipment 

3. Etc. 

Total income for strictly educational purposes (estimated) $ . . . . 



ACCOUNTING 69 

B. For specially designated objects not a part of the strictly educa- 
tional work 
I. From students 

1. Athletic fees and tickets 

II. From endowment investments 

1. Lectures — extra-curriculum 

2. Scholarships 

3. Student aid 

4. Prizes 

5. Athletic field maintenance 

6. Dormitory library 

III. From gifts and grants 

1. Lectures — extra-curriculum 

2. Scholarships 

3. Student aid 

Total income estimated for specially designated objects $ 

Grand total of income $ 



There are certain receipts and disbursements of a general 
nature pertaining to the current operations of a college which 
do not constitute a part of the income available for the ex- 
penses incurred in the cost of educating the students. Never- 
theless, they are in the majority of cases included by colleges 
among the educational receipts and disbursements, a proce- 
dure which renders it difficult to learn the exact cost of 
operation for strictly educational work. In some instances 
they are segregated and classified so that they may be 
eliminated from the statement without much difficulty. 
This method is an improvement upon the promiscuous 
inclusion, but it seems better still, as given above, to account 
for these operations in a separate section of the budget 
(see Div. B). Income on endowment and gifts for scholar- 
ships and student aid are examples. Appropriations should 
not exceed the funds available for these purposes. Any 



70 COLLEGE AND UNIVERSITY FINANCE 

amount unexpended should be carried forward to the next 
year's account and reserved for the object of the gift. Fees 
paid by students who are beneficiaries of scholarship funds 
and gifts under this plan should be counted as cash receipts 
since they differ only in the respect that the students obtain 
the funds wherewith to pay them from the college treasury 
rather than from their parents. This statement holds good 
whether the money with which to pay his fee is actually 
paid to the student, or whether it is credited to his account 
by book entry or voucher. 

HOW ESTIMATES OF INCOME SHOULD BE MADE 

In estimating budget income certain rules may be 
followed to advantage. First, and most important, is the 
rule that the estimate shall be conservative and sure of 
reahzation, unless something most unusual occurs. If there 
is doubt as to certain income being secured, it should not be 
included in the estimates. Appropriations for expenditures 
are made and obligations incurred on the basis of the esti- 
mates of income, which cannot be fully met if the estimates 
of income prove unreHable. 

STUDENT FEES 

The estimates of student fees should be the amount 
received from students for the last completed year, unless 
the officers have reasons for supposing that the amount will 
be smaller. Only in most exceptional cases should the 
estimate be placed at a greater sum, and the reasons for 
doing so must be most convincing. 

INCOME FKOM ENDOWMENTS 

In estimating income from endowment investments the 
investments which the college holds should be classified into : 
(1) those maturing later than the year for which the estimates 



ACCOUNTING 71 

are being made, on which the income is practically assured; 
(2) those maturing within the year for which the estimates 
are being made, on which the income is assured; (3) those 
maturing before the opening of the year for which the 
estimates are being made; (4) real estate owned; (5) cash 
awaiting investment; (6) unproductive investments. 

The estimated income from investments in Class 1 
would be the sum of the income payable on them during 
the year, less any provision made for amortizing premiums. 
It will be noted that the sum to be given as the estimate is 
the amount payable during the year rather than the sum 
accruing. As college expenditures are on a cash basis it is 
better to put the receipts on the same basis and include only 
those items which are actually received during the year and 
which can be used to pay the debts. Thus, a surplus at the 
close of the year is in cash, and a deficit is a real deficiency of 
receipts. Taking one year with another, the amount of 
receipts on the cash basis will not differ materially from that 
on an accrued basis, while the amount of labor included in 
keeping the accounts on the former basis is much smaller. 

The estimated income on securities in Class 2 would be 
the amount of income payable during the year on the invest- 
ments then held, plus the estimated income payable on the 
investments made to take their places, less provision for 
amortization of premiums. It is better to allow a little time 
for reinvestment, say a month, and to figure a sure rather 
than a high rate of interest on the new investments. 

Inasmuch as investments in Class 3 mature before the 
beginning of the year for which estimates are being made, 
an estimated rate of interest on their reinvestment should be 
allowed, as described imder Class 2. 

The estimate of income to be obtained from real estate 
owned (Class 4) should be based upon the experience of 



72 COLLEGE AND UNIVERSITY FINANCE 

previous years, modified by any known changes in rentals, 
taxes, wages, repairs, and other costs of operation. Depreci- 
ation must of course be provided for — otherwise, the principal 
of endowment would be dissipated. 

The same rate of return upon reinvestment should be 
allowed on cash awaiting investment as on reinvestments 
in Classes 2 and 3. 

Unproductive investments (Class 6) should include all 
non-income-producing investments and those from which 
income is doubtful. For them no estimate of income should 
be made. If any of them become income-producing during 
the year, so much the better for the college. In case any 
property is operated at a loss the estimated loss must be 
shown as a deduction from the total income. 

When the income on the several classes of investments has 
been estimated it should be apportioned to the unrestricted 
and restricted endowment in the ratio which they bear to 
the total, or on the basis of the investments belonging to each 
fund, if each fund is invested separately. The details of the 
estimated income on investments should be filed for reference 
and check when the income has been actually received. 
If errors in estimating have been made they may be located 
by this method, and should be avoided in the future. A 
lump estimate of income from endowment should not be 
made under any circumstances. It is only by considering 
each investment separately that an accurate and reliable 
estimate can be obtained. 

Reference has been made to amortization of premiums. 
Bonds and mortgages are frequently purchased at a premium; 
hence, if they are held to maturity there will be a loss in 
principal to the amount of the premium unless provision is 
made for it from income by the date of maturity. The 



ACCOUNTING 73 

theoretical way to make this provision is to set up what is 
called an amortization account.^ In actual practice, how- 
ever, this plan requires a great deal of bookkeeping, altogether 
incommensurate with the amount involved in the case of a 
college. A simple method which works well in practice is 
to find the number of years from the date of purchase to the 
date of maturity of the security, divide the amount of 
premium paid by that number, and each year transfer the 
amount so arrived at from income to principal. The cash 
so transferred should be deposited in endowment cash and 
the amount credited to premium account in the endowment 
funds ledger, if a premium account is kept separate; other- 
wise, the credit should go to the investment account. The 
cash transferred then becomes available for investment and 
the income it produces goes to the credit of endowment 
income. When the security matures the par value received 
and the amount of premium repaid by the annual transfers 
from income should equal the sum paid when the security 
was purchased. Thus, the final result is the same as in the 
case of strict amortization, and the yearly division of interest 
between principal and income differs but slightly, while the 
amount of labor saved is considerable. 

ESTIMATED INCOME FROM GIFTS 

Gifts for current purposes are more and more becoming 
a common source of income for endowed colleges, especially 
for those affiliated with religious denominations. Only gifts 
which can be absolutely counted on should be included 
in the estimates. Gifts may be made for regular expenses 

1 Webster defines amortization as follows: "To extingiiish a premium or discount 
involved in the purchase of a security by periodically charging off a portion of the 
premium or crediting a portion of the discount so as to bring the value to par 
at maturity, the transfer being made respectively from income to investment, or vice 
versa; loosely, to bring the value of a security to par in this way." 



74 COLLEGE AND UNIVERSITY FINANCE 

or for some special item of regular expense. The former 
class of gifts is most frequently made by a conference, 
synod, or central body of the denomination supporting the 
college, or by the alumni association, and reflects a reliable 
interest and sustained responsibility. Gifts for special items 
of regular expense are usually made by individuals who are 
especially interested in the work which they wish to aid. 

Sums of money are often given to colleges for a purpose 
which the college does not consider a part of its regular work. 
In such instances it is better to include them in a special 
section among the budget receipts and include appropriations 
of a similar amount in a separate section among the budget 
expenditures. By following this method the actual cost of 
the regular work of the college is not obscured, and the special 
work can be discontinued promptly when the fund is 
exhausted. 

Some colleges follow the custom of designating as gifts 
the difference between the estimated expenditure and the 
estimate of assured income. Such an expectation of obtain- 
ing the difference is more often based on hope than on assur- 
ance. It is much better to call the difference ''Deficiency 
of Income," which must be provided for by additional 
income or gifts, or avoided by reducing expenditures. 

ESTIMATES OF INCOME FROM MISCELLANEOUS SOURCES 

Colleges occasionally rent portions of their plant. 
Certain buildings or portions may also be used for dining- 
halls, bookstores, and the like. In all such cases rental 
should be charged for their use, including interest on cost 
and depreciation so as to place these activities on a strictly 
business basis. The amount of rental charged should be 
included among the estimated income from miscellaneous 
sources; income which cannot be classified under sections 



ACCOUNTING 75 

I, II, and III should also be included in this section. Income 
of items in Division B of Budget Income should be estimated 
in the same manner as income from similar items included 
in Division A. 

COMPAKISON OF ESTIMATED INCOME WITH INCOME 
RECEIVED PREVIOUSLY 

In making prehminary estimates of budget income it 
will be found exceedingly helpful to place in parallel columns 
the amount of income actually received during the past two 
or three years from each source. If the estimate for the 
coming year varies appreciably from the actual income of 
former years the difference should be capable of explanation 
and justification. There should be no guess work in the 
estimate. Unrehable estimates of income have often led 
colleges into trouble which might have been avoided. 

BUDGET APPROPRIATIONS 

After the amount of income for the coming year has been 
estimated, the next step in the process of budget making is 
to make a careful classification of the expenses of the coUege 
(strictly educational), if one is not already in use. The 
following classification may be used (see chapter on '' Dis- 
bursements, " pp. 20-21) : 

I. Administration and general expense 
1. Executive 

a) President's ofl&ce 

(1) Salary of president (Laing Fund) 

(2) Salary of secretary and assistants 

(3) Office expenses and supplies 

h) Treasurer's office 

(1) Salary of treasurer 

(2) Salaries of assistants and clerks 

(3) Office expenses and supplies 



76 COLLEGE AND UNIVERSITY FINANCE 

2. General 

a) Publicity 

(1) Salaries and wages 

(2) Printing, postage and stationery, and expenses 

(3) Advertising 

(4) Travel 

b) Catalogues, reports, and bulletins 

c) Commencement and public occasions 

d) Appropriations to student activities 

e) Annual audit 
/) Miscellaneous 

II. Operation and maintenance of physical plant^ 

1. Superintendence 

a) Superintendent's office 

(1) Salary of superintendent 

(2) Salaries of assistants and clerks 

(3) Office expenses and supplies 

2. Heating, lighting, water, and power^ 

a) Engineer's office 

(1) Salary of engineer 

(2) Salaries of assistants and clerks 

(3) Office expenses and supplies 

b) Wages of power-plant employees 

c) Fuel (including freight and cartage) 

d) Materials, suppHes, and expense 

e) Repairs to building and equipment 
/) Insurance (including liability) 

3. Care and maintenance of buildings 

a) Wages of janitors and artisans 

b) Materials, supplies, and expense 

c) Repairs (not included in a and b) 

d) Insurance (including liability) 

1 Special funds for care and upkeep of certain buildings must be expended for 
the purpose provided. 

2 If a central power plant is utilized for furnishing heat, light, water, and power 
for the educational and other departments of the college, the proportional amount for 
educational departments of the College of Arts only should be here included. 



ACCOUNTING 77 



4. Care and maintenance of furniture 
a) Wages 

h) Materials, etc. 

c) Repairs and renewals 

d) Insurance 

5. Care and maintenance of grounds 

a) Wages of employees 

b) Materials, supplies, and expense 

c) Liability insurance 

III. Instructional 

1. Dean's office 

a) Salaries of deans 

b) Salaries of assistants and clerks 

c) Office expenses and supplies 

2. Salaries for instruction 

a) Department of Astronomy 

(1) Professor A. J. Smith 

(2) Assistant Professor H. E. Jones 

(3) Instructor L. A. Black 

b) Department of Botany 

(1) Professor A. B. Coulter 

(2) Instructor M. A. Browne 

c) Department of Latin 

(1) Professor M. N. Rowe (EUery Fund) 

(2) Etc. 

d) Library 

e) Other departments in detail, as above 

3. Departmental supplies and expense 

a) Astronomy 

b) Botany 

c) Etc. 

4. Departmental equipment and books 

a) Astronomy 

b) Botany 

c) Etc. 



78 COLLEGE AND UNIVERSITY FINANCE 

IV. Contingent fund 

V. For specially designated objects not a part of the strictly 
educational work 

1. Lectures — extra-curriculum 

2. Scholarships 

3. Student aid 

4. Prizes 

5. Athletic field maintenance 

6. Athletics 

7. Dormitory Hbrary 

8. Miscellaneous 

Grand total of budget expenditures $ 

The appropriations in Section V should agree in amount 
with the income for the same purposes, which was included 
in Division B of Budget Income, unless the college desires to 
add from its own funds for any of these objects. 

When the budget classification has been determined a 
careful estimate should be made of the needs of the college 
for the coming year, item by item, as given in the budget 
classification. The data for the instructional division are 
usually collected by the president. The details for each 
department should be supplied by the person in charge of 
the department, preferably on a specially prepared form. 
The form should be arranged to show the needs of the 
department under the headings of the budget, viz.: (1) for 
instruction, (2) for supplies and expense, (3) for equipment 
and books. 

If the budget plan is already in operation appropriations 
of the current year for each of the items should be given in 
one column, and requests for additional amounts for the 
coming year inserted in columns parallel thereto — those 
considered important in one column and those deemed 
desirable in another. 



ACCOUNTING 79 

Any suggested reductions in appropriations should be 
entered in a separate colunm. Marginal notes or explana- 
tions of the requests may preferably be made on separate 
sheets. From the material thus supphed the president 
should make a report to the committee on budget of the 
changes in appropriations which he approves, classifying 
the additions as "Important" or ''Desirable." He may 
include everything asked for by a department in one or 
both of these classes, or he may consider it better to include 
a portion only. He may also add to the sums requested for 
certain items and insert amounts for new ones. It sometimes 
happens that the salary of a member of the faculty is fixed 
in advance at an amount which increases each year. Thus, 
it may be $2,000 for the first year, $2,500 for the second, and 
$3,000 for the third. In making the report to the budget 
committee any increases of this kind which have already 
been enacted should be included in a column entitled 
"Additions Enacted," because they must be cared for before 
any of the suggested additions classified as "Important" 
or "Desirable." 

The material for budget estimates for administration 
and general expenses usually may be prepared to best 
advantage by the treasurer or chief accounting ofiicer. 
He should of course obtain from the several executive officers 
a statement of their needs, listed on blanks similar to those 
used by the instructional division. He should pass upon the 
several requests and classify them for the budget committee, 
using the classifications of "Important," "Desirable," and 
"Deductions," as described above. 

Estimates of expenditures for the operation and main- 
tenance of the physical plant should be prepared by the 
person in charge of the buildings and grounds. The record 



80 COLLEGE AND UNIVERSITY FINANCE 

of expenditures for the past few years, modified to suit 
changing conditions, will serve as the basis of the estimate. 
Estimates for repairs and decorations should be based on 
careful inspection of the buildings. The estimates of this 
division should be sent to the treasurer or chief business 
officer to be vised, classified, and presented in the same 
manner as the estimates from the other divisions. 

Whenever estimates of income from restricted funds 
are included in the budget income a corresponding amount 
must be placed among the estimates of expenditures for the 
particular objects. If during the year the entire sum is 
not used the balance remaining must not be absorbed by 
other general expenses, but must be carried forward to the 
next year's budget. 

After the estimates and recommendations of the three 
divisions have been received and reviewed by the treasurer 
and financial officer, and the details classified as indicated, 
a summary should be made of the estimated income and 
expenditures as revised. The summary may be made as 
follows : 

BUDGET ESTIMATES FOR THE YEAR 

SUMMARY 



Income: 



From students .$ 90,000 

From endowment 80 , 000 

a) Unrestricted $72,000 

6) Restricted 8,000 

From gifts and grants 15,000 

From miscellaneous sources 2,000 

Total $187,000 



ACCOUNTING 



81 



Expenditures: 





Budget 
Appropri- 
ations 

FOR 

Present 
Year 


Additions 




Divisions 


Enacted 


Recom'd 

by 

Depts. 


Impor- 
tant 


Desir- 
able 


Deduc- 
tions 


I. Administration and 
general 


$25,000 


$1,000 


$1,500 


$1,000 


$500 


$300 






1. Executive 

2. General 


16,000 
9,000 


1,000 


500 
1,000 


500 
500 


500 


300 






II. Operation and main- 
tenance of physical 
plant 


28,000 




4,500 


3,300 


700 








1. Superintendence.. 


3,000 

16,000 
6,000 
1,000 
2,000 




500 

3,000 
800 
200 


500 

2,500 
300 






2. Heating, lighting, 
etc 






3. Care of buildings. . 

4. Care of furniture. . 

5. Care of grounds. . . 


500 
200 
















III. Instructional 


112,000 


4,000 


7,000 


2,800 


3,200 


1,000 


1. Salaries for in- 
struction 

2. Departmental sup- 
plies and expense. . 

3. Departmental 
equipment and 
books 


92,000 
14,000 

6,000 


4,000 


5,000 
1,000 

1,000 


2,000 
300 

500 


2,000 
700 

500 


1,000 






IV. Contingent fund 


10,000 
























Grand total .... 


$175,000 


$5,000 


$13,000 


$7,100 


$4,400 


$1,300 



Note — From the above it will be noted that the sum of the "Important" and 
"Desirable" columns does not equal the total recommendations by departments, the 
President and Treasurer having decided not to include some of the items recom- 
mended. 



After the summaries of estimated income and expendi- 
tures have been made, as above, supported in detail by 
the reports for each division, a comparison should be 
made of the total estimated expenditures with the total 



82 COLLEGE AND UNIVERSITY FINANCE 

estimated income. This comparison may be shown as 

follows : 

Total income estimated $187 , 000 

Expenditures estimated 

Budget appropriations for present year . . . .$175,000 
Add 

Items enacted 5 , 000 

$180,000 
Less 

Deductions 1,300 178,700 

Amount of income available for additions $ 8 , 300 

"Important" items recommended 7, 100 

Amount of income available for "Desirable" items $ 1,200 

Of which there are 4,400 

Leaving of "Desirable" items unprovided for $ 3,200 

From such a summary as the foregoing it may readily be 
seen whether the income estimated is sufficient to care for 
the estimated needs, and if not to what extent it falls short. 

A summary should be made in like manner for the items 
in Division B of Budget Income and Section V of Budget 
Expenditures, covering income and expenditures for items 
not a part of the strictly educational work, and the totals 
included in the complete budget. 

If the budget for the coming year is presented to the 
committee on budget in detail and in summary by the 
method here suggested the committee may, with little 
difficulty, learn of the several recommendations in detail 
and have a basis for deciding what should be eliminated from 
the "Important" and "Desirable" items, if the income is 
insufficient for all. Naturally, items in the "Desirable" 
column would be among the first to be excluded. 



ACCOUNTING 83 

A portion of the estimated income should be reserved 
for contingencies, under the title of ''Contingent Fund" to 
provide against an unexpected shrinkage in income, and for 
unforeseen expenditures. 

After the committee on budget has carefully studied 
the estimates of income and the needs of the institution for 
the coming year, it should incorporate its suggestions in a 
completed budget and recommend it to the board of trustees 
for adoption. The board of trustees should give careful 
attention to the recommendations of the committee on 
budget, and before approving the budget should assure 
itself that the estimates of income had been conservatively 
made and that the appropriations for expenditures were 
hkely to prove adequate to the needs of the institution and 
that no expenses which would have to be incurred had been 
omitted. 

METHOD OF BUDGET ACCOUNTING AND CONTROL 

When the budget has been adopted by the board of 
trustees its appropriations become available for the expenses 
of the year stated. Every department should be required 
to keep its expenditures within the limits of its appropria- 
tions. As a means to this end a ledger account should be 
opened with each item in the budget. If the number of 
budget items is large enough it may be better to have a 
ledger for the purpose, but if not, the accounts may be opened 
in the general accounts ledger, a portion being devoted to 
this use. If a portion of the general ledger is used for budget 
accounts it wiU be necessary to keep a supplementary record 
of requisitions issued. The use of requisitions is described 
below. The ledger accounts which record income receipts 
need no explanation. The ledger accounts for expenditures, 



84 



COLLEGE AND UNIVERSITY FINANCE 



however, differ in some respects from the ordinary in that 
they should record the requisitions approving the incurring 
of expenditures. For a complete control of expenditures 
limited to the amount of appropriation the record of bills 
paid is not adequate. It is necessary to exercise control at 
the point where the expense is authorized. This control 
is exercised most effectively by requiring every department 
to make requisition for proposed expenditures, giving details 
and estimates of cost based on catalogue prices or certified 
to by the purchasing agent, which requisitions should be 
approved by the treasurer or administrative officer before 
the expense is incurred. Requisitions should not be approved 
if the appropriations for them are insufficient. In such c^ses 
the board of trustees may be asked to increase the appropria- 
tion if the need is urgent. The ledger account should show at 
all times the balance of the appropriation available for future 
expenses. This balance is found by adding the expenditures 
made to date to the amount of requisitions unfilled and sub- 
tracting their sum from the total appropriation. In order 
to give these data most conveniently the ledger accounts 
with the budget expense items should be entered on specially 
ruled sheets divided in parallel columns somewhat as follows : 



Requisitions 


Expenditures Paid 


Appropbiations 


Date 


Num- 
ber 


Estimated 
Cost 


Actual 

Cost 


Date 


For 


Dr. 


Cr. 


Date 


Dr. 


Cr. 


Balance 



























The amount of appropriation should be entered to the 
credit of ''Appropriations," and the amount of any changes 



ACCOUNTING 85 

in it subsequently entered in the "Dr," and "Cr/' colunms. 
The amount in the column headed "Balance" will be the 
total of the appropriation at that time. As requisitions are 
approved they should be recorded imder "Requisitions." 
Payments made should be entered under "Expenditures 
Paid" — "Dr." and the amount distributed to the respective 
requisitions in the column headed "Actual Cost." If the 
actual cost differs from the estimated cost, the total of the 
latter colunm should be adjusted to the actual expense by 
adding or deducting the difference. If this adjustment is 
made regularly and promptly the amount of appropriation 
available may be found by deducting the total of the col umn 
"Estimated Cost " from the amount in the column "Balance" 
of appropriations. 

Expenditures for salaries are usually authorized for the 
entire year in advance and may be covered by one requisition. 
It is not necessary to make requisitions for every small item 
of expense. A blanket requisition may be made by every 
department covering its sundry small needs for an entire 
month. 

The budget method of control here detailed makes it 
possible to keep a constant check on expenditures, and to 
ascertain before expenditures are authorized whether there 
will be money to meet them. Each department may learn 
the status of its appropriations at any time and at stated 
times the trustees and officers may be informed of the 
progress and condition of the budget income and expendi- 
tures as a whole. 

BUDGET REVISION 

Criticism is sometimes made of the budget plan of 
operation on the ground that it is inflexible, does not provide 



86 



COLLEGE AND UNIVERSITY FINANCE 



for unforeseen contingencies, and ties the hands of the college 
officers by making rigid, specific appropriations before the 
opening of the year so that they cannot cope with changing 
conditions as they appear. Whether this criticism is justified 
depends upon the wisdom exercised in making and in operat- 
ing the budget. As has been stated already, the budget is 
devised to enable college authorities to limit their expendi- 
tures to their income. If this income is correctly estimated, 
appropriations made within it, and care then taken that no 
appropriation is overexpended, there can of course be no 
deficit. An equation is thus established between the esti- 
mated income and the expenses before the opening of the 
year. It is almost inevitable that changes unforeseen 
will occur in income, and that expenses will not be exactly 
as they were forecast. To adjust the budget to these 
changing conditions and to let it serve adequately it should 
be revised periodically during the year. The experience of 
the year to date should be taken as the basis of each revision, 
and in the light of that experience an estimate made in 
detail for the remainder of the year. Every item in the 
budget should be considered and note made of the amount 
of any probable variation from the original estimate. A list 
of variations, in detail and in summary, should be made, 
using a form designed as follows, or somewhat similar: 



Division 


Item No. 


Name op 
Account 


Okigxnal 

Estimate 


Present 
Estimate 


Variations prom 
Original Estimate 




Plus 


Minus 

















The items should be totaled, first by departments, next 
by divisions, and then the sum totals reached. The result 



ACCOUNTING 87 

of each revision, supported by the detailed statements, may 
be shown clearly in the following manner: 

REVISION OF BUDGET FOR 1920-21 ON OCTOBER 15 

Income: 

Original estimate $187,000 

Add total estimated variations in excess of 

original estimate 12 , 000 

$199,000 
Deduct total estimated variation less than 

original estimates 3,940 

Total income — present estimate $195,060 

Expenditures: 

Original estimates, including contingent 
fund $187,000 

Add total excess of variations from original 
estimates 5, 500 

$192,500 
Deduct total amount of variations less than 

original estimates 4 , 280 

Total expenditures — present estimate 188,220 

Net surplus — present estimate $ 6,840 

From such a summary it may be observed that certain 
appropriations are inadequate, that others are larger than 
needed, and that the total expenses for the year will exceed 
the appropriations by $1,220 according to present estimate. 
It may also be noted that from present indications the income 
will be $8,060 more than originally estimated, sufficiently 
large to care for the excess in expenditures and leave a 
remainder of $6,840. The board of trustees should there- 
fore be asked to substitute the budget as revised on Octo- 
ber 15 for the original one. If instead of the favorable result 



88 COLLEGE AND UNIVERSITY FINANCE 

shown above the revised estimates indicate that the expenses 
are Hkely to exceed the income, steps should be taken at once 
to reduce them — a task which may be undertaken with some 
promise of success because begun in time. If it be found 
impossible to make savings in expenditures the board should 
endeavor to increase the income. Through the instrumen- 
tality of periodic revisions trustees and officers may learn the 
probable financial situation early enough to avoid a deficit. 
They are also able to adjust the budget to changing circum- 
stances. 

The budget should be revised at least twice a year. 

CLOSING THE BUDGET 

At the end of the year the several budget income and 
expenditure accounts (with the exception of unused portions 
of income provided for special objects, which should be 
carried forward) should be closed into ''Surplus or Deficit" 
account. The surplus, if any, may be used as the trustees 
desire, or be reserved for future contingencies; the deficit, 
if any, should be raised immediately if at all possible. 

A budget made on the plan described, administered with 
care and intelligence, expenditures being authorized before 
indebtedness is incurred, and periodic revision being made, 
will be found an effective means of controlling expenses. 

In conclusion: 

1. A budget consists of two parts: (a) the estimates of 
income; and (h) the appropriations for expenditures. 

2. It should be divided into sections on the basis of the 
chief functions of the college. 

3. It should be made in advance of the period in which 
it becomes operative. 

4. The estimates of income should be on a conservative 
basis. 



ACCOUNTING 89 

5. Appropriations, as a general rule, should not exceed 
the amount of estimated income. 

6. A contingent fund should be set aside from the esti- 
mated income to allow for any unexpected shrinkage in 
receipts, and to provide for unforeseen expenses. 

7. Requisitions for expenses should be made and 
approved before obligations are incurred. 

8. Periodic revision of estimates of income and expenses 
should be made during the year, and adjustments made in 
accordance therewith. 

ACCOUNTING FOR AUXILIARY DEPARTMENTS 

In many institutions certain activities or departments, 
such as the schools of music and of art, stand on a different 
basis from other regular departments. They may be con- 
ducted with the expectation of yielding a profit to the college, 
or at least without causing it any expense. In order to show 
the actual results of their operations and to avoid obscuring 
the cost of the college of Hberal arts, the accounts of such 
activities or departments should be kept separate. But the 
budget plan should, of course, be adhered to. The classifi- 
cation of receipts and expenditures may follow the general 
divisions and items used in the college budget, omitting the 
items which are not applicable to the special department 
and inserting others which are pecuHar to it. The same 
budget principles should be observed; estimates of receipts 
and expenditures should be made in advance; requisitions 
should be approved before expenses are incurred; periodic 
revisions should be made; ledger accounts should be kept 
with the items of the budget; and reports should be made 
regularly to the officers and trustees, showing the financial 
conditions of the department. All legitimate charges of 
operation, which in this case should include provision for 



90 COLLEGE AND UNIVERSITY FINANCE 

depreciation of plant and equipment, should be included and 
credit given for services rendered to other departments or 
officers of the college. 

Any profit made may be applied as follows: (1) to pay 
obligations secured by the college credit and to repay advances 
made from the general fund of the college; (2) to create a 
reserve for expansion of the department, or for contingencies, 
and to provide against future deficits; (3) to assist the 
college in its educational work, or for any other purpose 
thought advisable by the board of trustees. 

Should the department be conducted any year at a loss 
it should be cared for from accumulated surplus or reserve, 
if there be any, or carried in suspense as a charge against 
subsequent profits, or paid from the general funds of the 
college. The account should be accurate and complete so 
that the financial situation may be shown clearly and 
definitely. 

ACCOUNTING FOR DINING-HALLS, DORMITORIES, ETC. 

The third group into which current operations are 
divided includes dining-halls, dormitories, bookstores, and 
similar enterprises. Inasmuch as they are usually operated 
on the theory that they shall be at least self-supporting the 
accounts should be so arranged and kept that the authorities 
may know whether they have completely paid their own way. 
Ledger accounts should be kept with the receipts and dis- 
bursements so as to show the principal kinds of each. All 
costs of operations must be included, such as heat and 
light, rent, repairs, depreciation, and administration, whether 
furnished directly or indirectly, and proper credit given for 
meals and supplies furnished to ofl&cers, teachers, and guests. 
The profits should be applied to repay the college's advances 



ACCOUNTING 91 

for stock and equipment, until fully repaid. After that has 
been done they may be reserved for the use and extension of 
the department itself, or for any of the expenses of the college. 
Accounting for these activities presents no unusual 
features requiring comment other than that there be emphasis 
on the need of including all receipts and expenditures, both 
direct and indirect. 

ACCOUNTING FOR SUNDRY RECEIPTS AND DISBURSEMENTS 
OF A GENERAL NATURE 

There are certain transactions pertaining to college 
operation which do not fall into any of the three groups 
heretofore described. They form a group by themselves. 
Accounts with stores, consumable material, accounts re- 
ceivable, and accounts payable, in fact all accounts which 
show the amount of the college's current assets and 
current liabiUties fall into this group. 

To conclude, accounting needs of an endowed college will 
be met by arranging and classifying the accounts to accord 
with the three general divisions into which the financial 
transactions fall, viz.: (1) funds and their investment; (2) 
plant and equipment funds and their use; (3) current 
operations. 

Accounts of each division should be kept separate, those 
in division (1) in a special set of books and the cash deposited 
in a separate bank account; accounts for divisions (2) and 
(3) may be kept in one set of books and their cash deposited 
in the general account, except that gifts for new buildings 
and equipment should be kept under division (1), classified 
as ''Funds for Special Purposes" until expended, the cash 
meanwhile being kept in the bank account for "Endowment 
and Funds for Special Purposes." 



92 COLLEGE AND UNIVERSITY FINANCE 

Accounts of division (3), (current operations) should be 
divided into four groups: (a) containing the income and the 
expenditures of the college for educational purposes and 
operated and controlled by the budget system; (6) containing 
the income and expenditures of special music and art schools 
and operated and controlled by the budget system; (c) 
containing the financial transactions of the undertakings of a 
business character; (d) containing the financial transactions 
for sundry general purposes which do not fall in groups 
(a), (6), and (c). 

BALANCING AND CLOSING THE LEDGERS 

The ledgers should be balanced regularly, at least once 
a month, and the accuracy of every account proved, especially 
accounts with funds and with their investments. The latter 
may be determined by using the equation previously men- 
tioned, viz. : Investments plus cash on hand must equal the 
fund. It is imperative that this equation be maintained, 
and if at any time such is not the case the difference must be 
discovered and adjusted at once. There will be very little 
chance of error or difference if the cash belonging to '^ En- 
dowment and Funds for Special Purposes" is kept separate 
from general account cash. Reports of the financial con- 
dition of the college should be furnished preferably monthly, 
but at least quarterly, to the officers and trustees. The 
form and arrangement of reports will be discussed in a 
subsequent chapter. 

At the end of the fiscal year the books should be closed 
in order that the financial result of the yearns operation may 
be learned. The ledger accounts with ^'Funds'' and with 
"Plant and Equipment," representing as they do assets and 
liabilities of a fixed nature, remain open since they are of 



ACCOUNTING 93 

a continuing character and do not concern the current opera- 
tions of the year. The ledger accounts in division (3), 
(current operations), should be closed into '^ Surplus and 
Deficit Account" (with the exception of the real accounts 
representing current assets and current liabilities) so as to 
determine the financial results of operations for the year, 
and to start the next year's account with a clear slate. 
The profit or loss on each operating unit or division should 
be shown separately. 

After the books are closed for the year reports showing 
the financial history for the year and the financial condition 
of the college at the end of the year should be made. For 
form and arrangement of the annual financial reports see 
chapter viii, page 105. 

PUECHASING 

The increasing annual expenditure for books, apparatus, 
furniture, and other college supplies necessitates increased 
care and skill in placing purchase orders. Greater effective- 
ness will be secured if purchases are considered from the 
college point of view, and not from that of the departments. 
For example, the apparent need for additional microscopes 
and other equipment may be reduced or eHminated by chang- 
ing class hours to permit a more continuous use of existing 
apparatus and equipment. 

In purchasing laboratory and other college equipment it 
is well to bear in mind that the most essential college equip- 
ment is now quite well standardized and its price is gradually 
becoming subject to competition. The purchase of specially 
made equipment is seldom justified, and oftentimes the best 
illustrative equipment for lecture use can be made with a 
small expenditure for material through the ingenuity of the 



94 COLLEGE AND UNIVERSITY FINANCE 

faculty member concerned or in a college shop. So-called 
home-made laboratory equipment is more apt to develop 
initiative on the part of the student than manufactured 
apparatus. 

In placing orders with firms and individuals the relation 
of the college to its community and constituency must be 
recognized. At the same time, economy of expenditure 
requires the maximum return for every dollar spent. This 
dual obligation can be recognized by placing orders with 
merchants and dealers of the college community only after 
it has been ascertained that they can be placed there as 
economically as elsewhere. 

Placing purchase orders should not be regarded as an 
incidental clerical task, but rather as one calling for a 
thorough knowledge of the institution's needs, and of the 
possible sources of supply and market conditions. If mate- 
rials are purchased in large quantities, quite possible when 
information is gathered as to the annual needs of the college 
before placing orders, better terms can be secured than 
can be obtained by purchasing for the departments sepa- 
rately. 

Files of catalogues and price lists, and properly designed 
records and forms will facilitate purchasing. It goes without 
saying that the purchase of supplies and equipment cannot 
be delegated promiscuously to any member of a college staff. 
Negotiations for purchases should not be undertaken without 
authority from the trustees, either through budget authori- 
zation, or by specific or general action. After authorization 
has been obtained, it may be advisable to have the department 
concerned furnish a detailed description and specifications 
of the material or apparatus needed, and make suggestions 
as to the best source of supply. 



ACCOUNTING 95 

To make purchases efficiently requires experience. 
Therefore, all purchases should be made by one college 
officer and employee only. An exception to this general 
rule might be made in the purchase of food supplies, which 
can better be intrusted to the person responsible for the 
satisfactory and economical operation of the dining-halls. 



CHAPTER VII 
ACCOUNT BOOKS AND RECORDS 

The books and records needed by an endowed college 
for recording its financial transactions are simple in character 
and conform in general to those used by other corporations. 
The bookkeeping system should be double entry. The 
principal books of account are the journal, the cash book, 
and the ledger. If the college be small, one set of books may 
suffice for all its needs, but ordinarily it is better to have a 
set for one or more groups of its financial transactions, 
with subsidiary books and records for the principal de- 
tails. 

The journal is used as a book of original entry to record 
gifts other than cash, to make closing entries, corrections, 
and transfers from one ledger account to another. A jour- 
nal regularly kept in stock by bookstores will serve the 
purpose. 

The cash book is used as a book of original entry to record 
chronologically all cash transactions. For the sake of con- 
venience and of economy one book might be used for cash 
receipts only, and another one for cash disbursements. The 
classification of receipts differs from that of disbursements 
and requires special ruling, and the space needed to record 
cash receipts rarely equals that required for cash disburse- 
ments so that many pages are wasted if both receipts and 
disbursements are entered in one book and the usual custom 
is followed of beginning entries on the first of each month 
on opposite pages. 

96 



ACCOUNT BOOKS AND RECORDS 97 

CASH BOOKS 

There should be a set of cash books for the general funds 
of the college, and another for endowment and funds for 
special purposes. Receipts from students may be entered 
to advantage in detail on a subsidiary cash book, and the 
total of each day^s collections transferred to the main cash 
book. The same principle may be followed whenever the 
entries for receipts from one source become very numerous. 
Thus, when collections of subscriptions for endowment and 
for buildings are being made the details would better be 
entered in a special cash book and the totals regularly trans- 
ferred to the endowment cash book. The principal cash book 
should contain all receipts, but whenever any class or kind 
of receipt requires many entries a subsidiary book should be 
used for the details, and the totals only entered in the main 
cash book. 

The cash books for disbursements should be used to 
record the amount paid and not to distribute the charges to 
the respective accounts. For that purpose a voucher 
system is better. When the voucher system is used, only the 
number of the voucher check and the amount paid need be 
entered on the cash book, since the details of each payment, 
the name of the payee, and the account charged will be 
found on the voucher register. 

LEDGERS 

The same principles should be observed in the use of the 
ledgers as in the case of the cash books. Thus, wherever 
possible, all general accounts should be kept in one ledger 
only, unless the number of any class or group becomes too 
large. Then a subsidiary ledger should be used for details. 
A single ledger will usually be sufl&cient for the accounts 



98 COLLEGE AND UNIVERSITY FINANCE 

of the Endowment Fund and Funds for Special Pur- 
poses. 

VOUCHER REGISTER 

Payments may be made to best advantage by using the 
voucher system. The voucher describing the payment and 
the check discharging it in the best organized institutions 
are now combined and known as the voucher check. It is 
well to make the voucher check in duplicate on the type- 
writer and retain a carbon copy in the files. For the purpose 
of recording and distributing the payments to the appropriate 
accounts the voucher checks should be entered on the voucher 
register and numbered consecutively. All papers and in- 
voices supporting the payments should be attached to the 
duplicate copy of the voucher check and filed numerically. 
At the end of each month the voucher register should be 
totaled and the totals journalized and posted to the respective 
ledger accounts. A simple card index of payments arranged 
alphabetically may be maintained, giving the name of the 
payee, number and amount of voucher check, and date of 
payment. The use of the voucher register to distribute 
charges has two main advantages over the use of the cash 
disbursement book. First, it is possible to prepare for 
payment and to enter on the voucher register all obligations 
for the month and to charge the appropriate accounts by 
journal entry so that the financial reports will show the 
college's true condition. When the cash disbursement book 
is used as the distributing medium only the obligations 
which are actually paid are taken into the accounts. If the 
college is short of funds, and so has many unpaid bills, the 
ledger accounts do not show the facts. Second, the voucher 
register is usually loose-leaf, is more flexible than a bound 
cash book, and may therefore be changed more readily to 



ACCOUNT BOOKS AND RECORDS 99 

accommodate revisions in distribution and new classifications 
of accounts. 

The total amount of the voucher checks entered on the 
voucher register each month should be posted to the credit 
of an account entitled "Vouchers Audited" or '^ Accounts 
Payable," and to the debit of the same account should be 
posted monthly the total of voucher checks paid, as shown by 
the disbursement cash book. Any balance to the credit of 
the account ''Vouchers Audited" represents unpaid voucher 
checks and should be reconciled and balanced with the unpaid 
voucher checks held in the office. 

PAY-ROLL REGISTER 

If the persons employed by the college are few in number 
they may be paid by voucher check as described above. 
But if they are many it will be better to use a specially 
prepared salary check for the purpose. Salary checks 
should be numbered and entered on a pay-roll register to 
distribute the charges to the accounts. The pay-roll register 
should be totaled, journalized, and posted monthly in the 
same manner as the voucher register. The total amount of 
the pay-roll for the month should be posted to the credit of 
a ledger account called ''Pay-roll," and the payments for 
the month as shown on the disbursement cash book, usually 
in totals only, should be posted to the debit of the account. 
A pay-roll card index, similar to the one used for voucher 
checks, may also be maintained. 

STUDENT ACCOUNTS 

student accoimts may best be kept by the card system. 
By a Httle ingenuity cards for registration and ledger 
accounts may be combined and made to serve the two 



100 COLLEGE AND UNIVERSITY FINANCE 

purposes. The combined card may be so constructed that by 
means of a perforation in the middle, the portion of the card 
used as a registration record may be detached and filed in the 
academic office as soon as the fees are settled, and the part 
used for the financial record retained in the financial office. 
Wherever possible the sum to be paid by the student should 
be determined by a person other than the treasurer, whose 
duty it should be to make the collections and check the 
accuracy of the charges. In many colleges a book is used 
in which are entered the names of the students arranged by 
classes, the charges against each for tuition, laboratory fees, 
and other items, and the payments as made. When the 
number of students is small, this plan may be used without 
difficulty, but it is neither so convenient nor so flexible as 
the card system and may become burdensome to operate 
when the number of students becomes larger. If a charge 
card, arranged to serve as a ledger account as well, is used, 
and if students are required to pay their bills in advance, a 
large amount of work customarily carried on in bilhng, 
posting, and collecting is dispensed with. The card system 
also makes it possible to segregate readily the unpaid ac- 
counts, if such there may be. 

Numbered receipts should be given for payments made 
by students, and carbon dupHcates kept on file. For the 
sake of convenience receipts may be obtained in book form, 
fifty originals and fifty duplicates in a book. The duplicates 
should be retained in the books and the books filed in numer- 
ical order. The receipt books may be utilized as books of 
original entry and the student's receipt cash book used for 
recording the collections and distributing them to the respec- 
tive earnings accounts by totals, thus avoiding the need of 
copying each payment in the cash book. Where this plan 
is followed, the reference made on the student's ledger card 



ACCOUNT BOOKS AND RECORDS 101 

to details of payment should be by receipt number rather 
than by cash-book page. 

LOOSE-LEAF AND BOUND BOOKS 

Loose-leaf records and the card system are well adapted 
to many phases of college accounting. As stated before, the 
card system is especially suitable for accounts with students, 
which may be numerous and usually cover short periods 
only. It is elastic, flexible, easily arranged in alphabetical 
or in other order, and may be readily kept up to date by 
eliminating cards for students not in attendance. Lists 
of scholarship appointments, of students rendering service, 
of pay-roll data, of accounts payable, and of accounts 
receivable, may be kept very satisfactorily on cards. The 
loose-leaf system is particularly well adapted for recording 
and distributing collections from students, for recording and 
distributing cash received in branch ofl&ces and business 
departments, and for registering and distributing voucher 
checks and pay-roll pajrments. 

The ledger containing the accounts with endowment and 
fimds for special purposes, and the ledger containing the 
general accounts in full, or in totals only, should be in bound- 
book form because they show the complete financial status 
of the college and need to be preserved intact. The principal 
journals and cash books in which appear a record and history 
of the receipts of the college, either in cash or in property, 
their conditions, circumstances, and use, for the same reason 
should be bound books. 

Thus a combination of card, loose-leaf, and bound- 
book systems is well fitted to college accounting — the 
card and loose-leaf for that part which is temporary 
and the bound-book for that which is of a permanent 
nature. 



102 COLLEGE AND UNIVERSITY FINANCE 

STATISTICAL RECORDS 

In addition to the records which must be kept to show 
the financial history and condition of the college, others of 
a statistical and informational character may be used to 
explain and supplement the data contained in the books 
of account. Such data may be made exceedingly helpful to 
the trustees, officers, and friends of the institution, and may 
stimulate greatly their interest. They are also very useful 
in assisting the administrative officers to operate the several 
departments as economically as possible by acquainting 
them with the details of cost and showing where leaks are oc- 
curring. There is scarcely any limit to the number and kind 
of statistical reports which a resourceful and ingenious 
financial officer may furnish to the trustees. To be of the 
greatest value such reports must be based upon and be in 
harmony with the ledger accounts. 

Statistical reports may be used for analyzing the college 

educational expenses. To illustrate, the expenses may be 

classified into: 

I. Salaries and wages 
II. Materials, supplies, etc. 

The salaries and wages may be subdivided to show the 
amount paid to each rank and class, as: 

1. Instructional 

a) Professors 

b) Associate professors 

c) Assistant professors 

d) Instructors 

e) Assistants 
/) Lecturers 

2. Administration 

a) Officers 

b) Clerks 

3. Labor and unclassified service 



ACCOUNT BOOKS AND RECORDS 103 

Expenditures for materials and supplies may be sub- 
divided as follows : 

1. Communication 

a) Postage 

b) Telephones and telegrams 

2. Stationery and office supplies 

3. Publications and printing 

4. Travel 

5. Equipment repairs, building repairs 

6. Supplies for instruction 

7. General supplies and expense 

8. Rent 

9. Interest 

10. Insurance 

The capital or plant accounts may be divided into: 

I. Land and buildings 

11. Equipment 

Land and buildings may then be subdivided into: 

1. Land 

2. Buildiugs and additions 

3. Land improvements other than buildings 

Equipment may be further divided into : 

1. Apparatus 

2. Furniture and office supphes 

3. Books 

4. Machinery and tools 

5. Museum specimens, and collections 

6. Live stock 

In hke manner the receipts and expenses of dining-haUs, 
dormitories, and bookstores may be subdivided as to source 
and kind, and comparison made with the same items for 
the month or year, or years, previous. By this means the 



104 COLLEGE AND UNIVERSITY FINANCE 

details of operation may be learned and any unfavorable 
tendency corrected if possible. 

Graphic representation of statistical data is now coming 
into very general use because it enables the reader to obtain 
at a glance the significance of the subject presented. He 
can see readily which of several columns is the longest, but 
it requires a mental effort to determine which of several sets 
of figures is the largest, and a much greater effort to appre- 
ciate and retain the amount of the variation. In presenting 
reports of the receipts and expenses of the college, and of 
its business departments so as to show how they are related 
to those of previous years and the direction in which cost of 
operation is tending, the business officer should make use of 
curves and graphs so that the facts may be quickly and 
vividly perceived. 

The advantage of the statistical and informational 
report is that it may be elaborated or curtailed as circum- 
stances require. Its use may be discontinued if it has served 
its purpose as respects some one department and devoted 
to some other department or account needing attention. 

The financial officer of the college should be always 
alert to detect any evidences of excessive cost and of unwise 
expenditures. He will find that a judicious use of statistical 
records, showing the details of any account and how they 
compare with those in previous periods, will assist him in 
detecting unfavorable tendencies, and will enable him to 
present them in an intelligible manner to the board of trustees 
for action. 



CHAPTER VIII 
FINANCIAL REPORTS 

ANNUAL 

The fundamental purpose of issuing an annual report of 
college finances is to have accurate information regarding 
the financial condition and history of the college available 
for distribution among the trustees, alumni, ofiicers, friends, 
and patrons of the institution. Consequently the officer who 
prepares and presents a clear, concise, and easily understood 
report does his institution and the pubHc a real service. 
The press keeps the pubHc informed on those matters of 
educational poHcy and interests which have news value, but 
at best these give a limited view of the college's real work 
and activities. It is important therefore that the college 
keep its constituency and the pubUc rehably informed of its 
poHcies and achievements. The educational features are 
usually set forth in the annual catalogue and in the report of 
the president, while the financial condition and operations 
are disclosed in the report of the treasurer or financial 
officer. It is with the latter report that the author is chiefly 
concerned. 

It is often said that financial reports are made to conceal 
the situation rather than to disclose it. The author does 
not for a moment imagine that college reports are con- 
sciously made on this principle, yet the effect they produce 
is frequently of that nature. This impression is produced 
by poor arrangement of subject-matter, lack of coherence 
and sequence, failure to make cross-references, and by the 

105 



106 COLLEGE AND UNIVERSITY FINANCE 

abundance of inconsequential details. The results is that the 
reader is confused and wearied. A carefully prepared and 
well-arranged treasurer's report, giving in clear and orderly- 
fashion the financial situation of the college, its fiscal history 
during the period under review, with appropriate comment 
and explanation regarding features of special interest, 
undoubtedly will be welcomed. Full information inspires 
confidence and stimulates interest. 

CONTENTS OF ANNUAL REPORTS 

A study of the annual reports of many college treasurers 
shows that they contain subject-matter which may be 
separated into five divisions: (1) survey of results for the 
year, which usually appears as an introduction; (2) balance 
sheet; (3) current operations, income, and expenses; (4) 
gifts; (5) explanatory statements and statistics. 

The order in which the foregoing divisions appear in the 
several reports, where any order is attempted, varies greatly, 
but the arrangement here suggested appears most logical, 
for after the introduction reciting the results of the year's 
operations comes the balance sheet, which contains in totals 
all the assets and liabilities of the college. It seeks to give 
a complete picture of the financial condition on the date 
mentioned, and by cross-reference may be made the key 
to the subsequent explanatory statements and schedules. 
After obtaining a picture of the financial condition, one looks 
for a report of the current operations for the year and the 
resulting surplus or deficit. The report of current operations 
thus naturally follows the balance sheet. These are the 
main divisions of the report because they give the financial 
condition of the college and the results and details of its 
operations. The remaining divisions devoted to ''Gifts" 



FINANCIAL REPORTS 107 

and to ''Explanatory Statements and Statistics" consist for 
the most part of details of what has already appeared in 
totals only in the balance sheet and in the statements of 
"Current Operations." 

I. SURVEY OF RESULTS 

In the introduction the treasurer should try to give in an 
interesting manner an accoimt of the financial features of 
special interest occurring during the year. The result of the 
year's operations, the increase in assets, if any, and of 
what it consists, whether of additional endowment or of gifts 
for buildings and equipment, and the prospect of erecting 
buildings and other plans for expansion should be mentioned. 
The principal changes in income and in cost of operation 
should be referred to and elucidated. The principles followed 
in keeping the accounts and in making the report should be 
explained and reference made to the schedule and page on 
which the details of the subjects alluded to may be found. 
Mention should also be made of gifts received, and comment 
made on those of especial significance. The introduction 
should serve as an interpretation of the report, but should 
not undertake to re-tell all that is contained in it. 

II. THE BALANCE SHEET 

The balance sheet is designed to indicate the financial 
situation of the college at the time indicated. It ought 
therefore to show aU its assets and liabilities properly 
classified and arranged in a manner easily understood. For 
this reason it is better to exhibit the amount of assets and 
liabiHties in totals only, and to rely upon subsequent sched- 
ules for details. This arrangement makes the picture clearer 
because the entire situation is given by means of a few items. 



108 COLLEGE AND UNIVERSITY FINANCE 

The order in which the assets and habilities appear in the 
balance sheet is of importance. They should be arranged 
to convey the information in the sequence in which it is 
usually sought. The first questions ordinarily asked regard- 
ing an endowed institution are : What is the amount of endow- 
ment, in what kinds of property and securities is it invested, 
and what cash, if any, remains uninvested? The next 
question will probably be: What is the cost of buildings, 
campus, and equipment ? Information as to the amount of 
current assets and Habilities will then be sought, and what 
relation they sustain to each other, whether the assets exceed 
the liabiHties, and whether the assets are of a liquid nature. 
Finally, inquiry will be made regarding accumulated surplus 
or deficit, and whether there are reserves for future contin- 
gencies. An illustration of the order in which the items may 
appear, and the arrangement of the subject-matter in the 
balance sheet is given on pages 128-29. 

In each of the divisions of the balance sheet: (1) endow- 
ment, (2) plant, and (3) current accounts, the total debits 
and total credits should equal each other. Thus, the simi of 
permanent funds should be exactly accounted for by invest- 
ments of cash on hand awaiting investment. Capital 
provided by gifts or otherwise for plant — that is, for land, 
buildings, and equipment — should be balanced by the 
amount invested in the college campus, buildings, and 
equipment, including furniture and books, plus cash on hand 
and temporary investments, if any unexpended plant funds 
are being held. The amount of current funds and liabilities, 
including reserve and surplus (if any) should be equaled by 
current assets, advance payments, cash on hand, and deficit 
(if any). Cross-reference should be made to the numbers 
of the schedules and pages in which are given the details of 
the items appearing in totals in the balance sheet. 



FINANCIAL REPORTS 109 

The figures in the balance sheet must of course be taken 
from the books of account and represent facts. If strict 
separation of permanent funds, plant funds, and current 
funds has not been actually maintained, if endowment has 
been used in erecting college buildings, and if a portion of 
endowment cash has been spent for current expenses of the 
college, or if building funds which should be on hand have 
been diverted, for a time at least, to some other purpose, 
the balance sheet must reflect the actual situation. The 
best way to show in the balance sheet these improper usages 
and still preserve the three divisions is to indicate among the 
endowment investments in Division 1 the amoimt of endow- 
ment used for college plant, and show in Division 2, first, the 
total cost of plant, and then deduct the amount of endow- 
ment used for plant as shown in Division 1. If endowment 
cash has been used temporarily for current purposes that 
fact should be made clear by showing among permanent 
assets in Division 1 the amount due to endowment, and 
placing the sum in Division 3 as a current liabihty. The use 
of endowment funds for college buildings and for current 
expense, even temporarily, is greatly to be deprecated, but 
imfortunately the custom is somewhat prevalent, especially the 
use of endowment cash for current purposes, and, as has been 
pointed out, is due to the fact that endowment and current 
cash are carried in one bank account. An excellent order 
and arrangement of the balance sheet cannot overcome a 
poor condition of affairs and an unwise plan of operation, 
but by bringing the result of such procedure into clear reHef 
they may make the situation manifest, and so lead to 
improvement. It is probably safe to say that college trustees 
in numerous instances are not furnished with statements 
and reports which show clearly the financial condition and 
methods of the institutions committed to their trust, for if 



110 COLLEGE AND UNIVERSITY FINANCE 

they were they would not rest until the undesirable features 
had been eliminated. 

By adhering to the order and arrangement of the balance 
sheet herein suggested, and by following its classification 
logically, many of the peculiarities and anomalies which are 
found in published reports would be obviated. For example, 

College had received an interest-bearing note from 

a friend for the construction of a swimming-pool. The gift 
was included among plant funds, but the note was shown 
among current assets as a note receivable. To anyone 
familiar with the situation it was perfectly evident that the 
proceeds of the note could not be used properly for the pay- 
ment of current bills, the inference which would be drawn 

from the balance sheet. At University the treasurer 

had included students' tuition notes among endowment 
investments because they bore interest and were income- 
producing. If he had accounted accurately for the endow- 
ment he would have discovered that the students' notes were 
in no way related to it. Moreover, the confusion as to what 
constitutes endowment would be avoided and the custom of 
including building funds among endowment, which is some- 
times followed, would be prevented by following this order 

and arrangement. In College report a fund which 

was being accumulated for the erection of an art building was 
called building endowment, and included in endowment. 
Under the plan herein suggested it would have been classified 
without question in Division 2 as a building fund. 

III. CURRENT OPERATIONS 

The third division of the report should contain the 
statements of current operations for the year. First of all 
should be given the surplus or deficit account, in which should 



FINANCIAL REPORTS 111 

be shown the surplus or deficit of each of the several divi- 
sions of the college operated as a separate unit. The amount 
of the difference between the total of the surpluses and the 
total of the deficits will be the net surplus or deficit of the 
college for the year. In subsequent tables and schedules 
the details of income and expense for each operating unit 
should be listed. Thus, the income and expenses of the col- 
lege for educational work should be detailed in one state- 
ment. Separate statements for each of the business and 
self-supporting departments of the college, such as the 
'dormitories, dining-halls, bookstore, and school of music, 
containing particulars as to their income and expenses, 
should then follow, care being taken to see that all legitimate 
charges have been made, including those for heat and light 
from the central power plant, and rent for space used. 
A very great diversity exists in reporting current operations. 
They are frequently combined in one statement in such a 
way that it is impossible to determine whether the dormi- 
tories, dining-halls, bookstore, and separate schools have 
been conducted at a profit, or whether they have been an 
expense to the college. In other instances, separate reports 
are made of these departments, but more or less incompletely. 
Sometimes no charge is made for heat and fight from the 
central power plant, nor for the use of space, nor for depreci- 
ation. In other cases, only one or another of these items 

is included. In the report of CoUege all current 

operations were included in one statement and the items 
arranged in alphabetical order, probably the most illogical 
and uninforming method possible. 

It is of the utmost importance for the trustees and 
friends of the college to know what is the expense for strictly 
educational work, and whether other activities are a help 



112 COLLEGE AND UNIVERSITY FINANCE 

or a hindrance. It is only through such knowledge that 
intelligent action may be taken. It is not necessary nor 
advisable to report each ledger account separately in the 
printed annual report. Those of a similar kind may be 
grouped. For example, there would probably be ledger 
accounts with every department of the college of arts for 
instruction, for supplies, and for equipment, but in the 
printed report the sum paid for instruction in all departments 
should be given in one item, that paid for supplies in another, 
and that for equipment in still another. 

The accounts in the ledgers should be arranged and kept 
in such manner that the material for the printed annual 
report may be taken from the books with ease. The budget 
method is especially suitable for this purpose because the 
accounts must be decided in advance and so may be grouped 
and arranged in an orderly and logical manner. College 
authorities are often asked by federal and state officers, 
denominational agencies, educators, and others, for infor- 
mation under the headings of permanent funds, plant, and 
current accounts, as here suggested. If the accounts are 
so kept and the annual reports so constructed that the 
information sought may be answered without difficulty much 
time and expense will be saved. Many colleges keep their 
accounts on such an individual system that days and weeks 
are often consumed in trying to answer questions asked by 
the persons mentioned, and even when the information is 
given there are grave doubts of its reliabihty. 

IV. GIFTS 

The fourth division of the annual report of the treasurer 
should contain a Kst of gifts paid to the college during the 
year. With endowed colleges gifts form a very important 



FINANCIAL KEPORTS 113 

part of the year's financial history and a report of them ought 
to occupy a prominent position. Gifts are made for one of 
two purposes: for additional resources, such as buildings, 
land, equipment, and endowment; or for current uses, such 
as instructors' salaries and suppHes for departments. They 
should therefore be divided, those for capital purposes being 
put in one class, and those for current uses in another. The 
two classes should be further subdivided to show the objects 
for which the gifts are made. In each of the subdivisions 
the names of the donors and the amounts of the gifts should 
be hsted in detail. If the statement of gifts is arranged in 
the manner herein described it will not be necessary to list 
them again when they appear in other tables and schedules 
of the report, because the totals of the several subdivisions 
may be inserted in the appropriate parts of the report and 
cross-reference made to the statement of gifts for details. 
If this custom were more generally followed the number of 
pages in treasurers' reports could be much reduced. 

V. EXPLANATORY STATEMENTS AND STATISTICS 

In the fifth and final division of the treasurer's annual 
report, explanatory statements and statistics should appear; 
they should be called ''Schedules" because they are used to 
furnish details and explanations of items which have appeared 
in Division 2 (the balance sheet) and in Division 3 (statement 
of current operations). 

Since the statements in those two divisions show the 
college's financial condition and history for the year, and are 
therefore of prime importance, it is better to designate them 
''Tables." Practically every item given in the balance sheet 
in total should be explained in detail by a subsequent 
schedule. Thus, while in the balance sheet investments of 



114 COLLEGE AND UNIVERSITY FINANCE 

permanent funds may be given in one sum, the schedule of 
investments should indicate the several kinds, and, if thought 
desirable, the particular investments of each kind. In this 
way full publicity may be given to the manner in which the 
funds are invested. The schedule of the plant should give 
a list of the buildings and their cost, the dates of erection, 
the kind and cubic content, the cost of land used for campus 
and its extent, and also the cost of equipment and furniture. 
In like manner, details of endowment and special funds 
should be reported in separate schedules, which should indicate 
the name of each fund, its amount, and the object for which 
it was given. Endowments should also be divided into 
restricted and unrestricted. Each of these classes should be 
further subdivided and grouped according to object. Other 
items in the balance sheet and current operation tables 
requiring elucidation should be explained at length in 
schedules and connected with the tables by cross-reference. 

Statistics furnished may be of various kinds, depending 
upon the subjects which are thought to be of interest to the 
readers. In some reports statistics of salaries paid, classified 
by departments and by ranks, are inserted; in others, 
details of student loan funds are given. Statistics of depart- 
mental costs, arranged as to capital and current expenditures, 
are frequently published. Care should be exercised not to 
make the report too voluminous through the inclusion of 
statistics, the interest in which is confined to a few readers. 

In general, the treasurer's report should be clear, concise, 
and complete. Its contents should be arranged in logical 
order and its terminology not too technical. 

Finally, the correctness of the statements in the report 
should be vouched for by a firm of certified public account- 
ants, whose certificate should be appended. 



FINANCIAL REPORTS 115 

A treasurer's complete annual report of a hypothetical 
college, arranged in form and method so as to embody the 
results and to give effect to the suggestions and principles 
heretofore stated, has been made and printed on pages 
119-63. With the notes and explanations given it is hoped 
this will be quite clear and readily understood. 

FOR TRUSTEES AND OFFICERS 

The annual report of the treasurer is primarily designed 
to inform the friends of the college and any others who may 
be interested, of its condition and financial history for the 
year. It should therefore be framed most effectively to 
accomplish that purpose. Since it is pubUshed but once a 
year, and contains much information in summary form only, 
it does not meet fully the needs of the trustees and officers 
who must administer the financial affairs of the college day 
by day. For them financial reports should be made more 
frequently in order that they may be kept fully and reliably 
informed of the financial condition and progress of the college. 
Only thus can the interest of the trustees be effectively 
maintained and data be furnished on the basis of which they 
may take intelligent action. The reports should of course 
be based on figures in the ledgers and be in harmony with 
them, and should contain the following information: (1) 
the status of the current operations and the extent to which 
the estimates of income and expenditures are being reaHzed, 
with the amount of variation, if any, from the original 
estimates; (2) the status of the endowment funds and the 
amoimt uninvested; (3) the condition of funds for special 
purposes and the extent to which the purposes are being 
carried out; (4) the condition of the current assets and 
liabilities; (5) the financial situation as a whole. 



116 COLLEGE AND UNIVERSITY FINANCE 

Information regarding current operations controlled by- 
budget method may be given in a report containing the 
following: (a) the original estimates; (6) the pro rata of 
estimates to date; (c) the actual receipts and expenditures 
to date; (d) the outstanding requisitions; (e) the relation 
which the actual receipts and the actual expenditures, 
including unfilled requisitions, bear to the pro rata of receipts 
and expenditures, with the amount of excess or shortage; 
(/) the balance available for use after providing for all 
outstanding requisitions. 

The items should be grouped by departments and in 
sununaries and not given in too much detail. In addition 
to the information here described, a comparison of the total 
receipts and expenditures for the present year with those 
of the previous year will be very helpful. 

The condition of the endowment funds, the funds for 
special purposes, the current assets and liabilities, and the 
financial condition as a whole may be disclosed by a properly 
constructed balance sheet in which the items are grouped 
to show the present status. If the college conducts a book- 
store, dining-hall, or any other so-called business department, a 
statement of its financial condition and progress, together with 
a comparison with that of the previous year should be made. 

The reports should be made monthly, or not less often 
than quarterly, and copies should be sent to every trustee 
and officer. The officer who prepares the reports should send 
a letter with them calling attention to significant features, 
and to any matter which in his judgment requires attention. 

STATISTICAL REPORTS 

In addition to the reports which the treasurer should 
make regularly, whenever occasion demands he should also 



FINANCIAL REPORTS 117 

make reports regarding the financial condition of any depart- 
ment which he may think needs attention. For example, 
if the dining-halls are losing money, a detailed report of their 
financial history for the past several years, giving particulars 
of the income and expenses and their tendencies, wiU enable 
the trustees to act intelHgently. If the report discloses the 
fact that expenses are higher than they ought to be, steps 
may be taken to improve the management ; if the patronage 
is falhng off inquiry may be made regarding the attractive- 
ness and variety of the food furnished, or if the patronage 
is still as great as in the past, but the receipts relatively 
smaller, it may be decided to increase the prices. 

Statistical reports of a similar kind might well be fur- 
nished frequently to the trustees, showing the relation 
between the market price and book value of investments 
held, its trend, and any other features of interest, the nature 
of the investments and the varying ratios which the different 
kinds bear to the totals in the several years. The operation 
of the dormitories, bookstore, and music school may also 
be reported upon and comparisons made of their operations 
for a number of years. 

TRUST FUND REPORTS 

Although the trust fimds held by an endowed college 
may be many in number, trustees are rarely acquainted in 
detail with what they are, their objects, conditions, and how 
the latter are observed. New trustees who are not familiar 
with the trusts and their history are being elected constantly 
in the place of trustees who have served for many years and 
drop out on account of Hmited term, age, or death . The funds, 
however, should be carefully preserved and the conditions 
scrupulously observed. Unless the trustees know what the 



118 COLLEGE AND UNIVERSITY FINANCE 

conditions are, how can they be sure that they are being 
fulfilled ? But as trustees, such is their duty. 

An endowed college is usually seeking gifts, and it should 
for every reason manage those it has in the wisest manner, 
carefully observing the conditions attached to them. To ac- 
quaint the trustees with the conditions of trust funds and to 
keep them informed regularly that the conditions are being 
fulfilled, a report of one or more trusts should be made to the 
trustees monthly. The report should give the letter and 
date of gift, the history of the trust, whether the gift was 
made in cash or in securities, what the present investments 
belonging to the fund are (if they are kept separate), the 
conditions of the trust, and the way in which the conditions 
are being fulfilled. For example, if the trust be for a fellow- 
ship, the names of the fellows appointed since the date of the 
last report should be given. 

By means of such reports the trustees may in course of 
time become fully acquainted with all the trusts which the 
college holds and assure themselves that the conditions are 
being observed. Another advantage may be derived from 
making the reports. In the course of time the reports 
constitute a file embodying in convenient form the history 
and execution of each trust. The administrative officers of 
the college may also profit from these reports because by the 
recital of the manner in which the conditions of the trusts 
have been executed any omissions may be observed imme- 
diately and provision made against their recurrence. 



CHAPTER IX 
ANNUAL REPORT OF THE TREASURER 

To the Trustees of College: 

Gentlemen: 

I have the honor to present herewith the sixty-fifth 
annual report of the treasurer for the fiscal year which ended 
June 30, 1921, in which is given the financial history of 
the college for the year and its financial condition at its 
close. 

It gives me pleasure to state that the financial results 
were satisfactory, particularly so when one considers the 
economic unrest of the year, as a result of the Great 
War. 

SUEPLUS AND INCREASE IN ASSETS 

The current operations for the year resulted in a surplus 
of $3,293.88. The sources of the surplus are shown in the 
table on the next page. By action of the executive committee 
$1,059.43 of the surplus has been added to "Reserves" for 
dormitories and dining-halls, equipment and expense; 
$289.97 to annuity income reserve; and the remainder, 
$1,944.48, to accumulated surplus, which now stands at 
$3,216.14. In accordance with the pohcy of the board, 
rental has been charged to the dormitories, dining-halls, and 
School of Music for buildings and equipment used equivalent 
to interest at 4 per cent per annum on cost plus a sum for 
the estimated amount of depreciation, and credited to 
college income. 

119 



120 



COLLEGE AND UNIVERSITY FINANCE 



It will be noted from the following table that the receipts 
and expenditures of the college as a whole for the year 
were as follows: 

RECEIPTS AND EXPENDITURES FOR THE YEAR FOR 

ALL PURPOSES 

Current 



Receipts 



Expendi- 
tures 



Surplus 



Excess 
Expendi- 
tures 
Provided 

from 
Balance 
Brought 
Forward 

from 
Last Year 



College of Liberal Arts (Table III, 
p. 131) 

Dormitories (Table V, p. 136). . . 

Dining-halls (Table VI, p. 137). . 

Bookstore (Table VII, p. 138).. 

School of Music (Table VIII, p. 
139) 

Annuities income (Schedule VI, 
p. 156) 



$191,628.79 
16,725.00 
31,681.11 
21,092.93 

14,905.11 

9,386.97 



$190,642.45 
16,683.57 
30,663.11 
20,404.88 

14,635.02 

9,097.00 



; 986.34 

41.43 

1,018.00 

688.05 

270.09 

289.97 



Surplus (Table II, p. 130) .... 

Reserves (Schedule X, p. 162) . 

Special funds for designated pur- 
poses (Schedule VIII, p. 158). 

Special lectures (Schedule VIII, 
p. 158) 

General funds for designated pur- 
poses (Schedule IX, p. 161) .. . 



Deduct duplications and transfers 



$285,419.91 



$282,126.03 



4,149.40 
315.72 



47,227.78 



222.50 

1,500.00 

47,280.64 



$3,293.88 
4,149.40 

93.22 



$1,500.00 
52.86 



$337,112.81 
49,088.30 



$331,129.17 
47,738.90 



$7,536.50 
1,349.40 



$1,552.86 



Net totals. 



288,024.51 



$283,390.27 



Increase in ciurrent assets 
from operation 



56,187.10 
1,552.86 



$1,552.86 



1,634.24 



TREASURER'S REPORT 
Capital 



121 





Receipts 


Expendi- 
tures 


Losses 


Net 

Increase in 

Capital 

Assets 


Endowment (Schedule V, p. 152). 

Endowment annuities (Schedule 
VI, p. 155) 

Buildings and equipment (Sched- 
ule VII, p 157) . 


$29,999.69 

4,000.00 

31,839.49 

3,050.00 


$ 281.57 

3,000.00 

49,108.60 


$7,749.13 


$21,968.99 
1,000.00 




31,839.49 


Books added to property paid for 
from income 




3,050.00 










Deduct transfers 


$68,889.18 
3,000.00 


$52,390.17 
3,000.00 


$7,749.13 


$57,858.48 










$65,889.18 


$49,390.17 


$7,749.13 




Increase in capital assets 


$57,858.48 













Receipts for current purposes $288,024.51 

Expenditures for current purposes 283,390.27 

Resulting in an increase in assets from current operations 

of $ 4,634.24 

The college also received for capital pur- 
poses $ 65,889. 18 

Which was diminished by expenses and 

losses of 8,030.70 



Making a net increase in capital assets of 57 , 858 . 48 

A total increase of assets during the year of $62,492.72 



Expenditures amounting to $47,347.80 were made for 
enlarging, remodeling, and furnishing dormitories and 
residences, an improvement made possible by the generosity 
of Mr. Samuel Chapin. To procure preliminary plans for 
the Students^ Christian Association and Recreation Building, 
$1,760.80 was expended. The total of these two sums, 
$49,108.60, was provided from gifts and interest thereon. 



122 COLLEGE AND UNIVERSITY FINANCE 

The increase of the college assets, $62,492.72, consisted 
for the most part of gifts. The gifts for capital purposes 
amounted to $53,881.61, of which $27,420.21 was for 
additional endowment, and $26,461.40 for buildings and 
equipment. In Table X, page 141 of this report, will be found 
a detailed list of the donors, the amount of their gifts, and the 
purposes for which they were contributed. The college 
extends its grateful thanks to its friends for these evidences 
of their interest in the work of the college. Mrs. Mary W. 
Ladd made a most acceptable gift of $4,000 for scholarships, 
subject to an annuity of $200 during her lifetime. Owing to 
the death of Mr. N. Clark his contribution of $3,000 made in 
1904 for scholarships on an annuity basis now becomes 
available endowment. The net profits on the sale of endow- 
ment securities amounted to $2,830.35, which has been added 
to the consolidated endowment fimds. Stock to the amount 
of $7,000, which had been given to the college as a part of 
the Hanam Fund for student aid was charged off as found to 
be of no value. 

The net additions to assets may be classified as follows: 

Net additions to endowment $22 , 968 . 99 

Net additions to plant funds 34, 889 . 49 

Net additions to current assets 4,634.24 

Total $62,492.72 

The total investments held by the college on June 30, 
1921, were $2,065,293.43, belonging to 

Endowment funds $1,749,243.43 

Endowment annuity funds 158 , 300 . 00 

Building and equipment funds . . . 143 , 750 . 00 
Current funds 

(Certificate of deposit) 14 , 000 . 00 

$2,065,293.43 



TREASURER'S REPORT 123 

Owing to the depression in value of bonds and stocks the 
book value on June 30 was $15,040.60 in excess of the 
market value. 

CUREENT OPERATIONS — COLLEGE OF LIBERAL ARTS 

The income and expenses of the college for the year 
were the largest in its history. Notwithstanding the increase 
in salaries of administrative officers and faculty and the 
greater cost of all kinds of services and materials, the 
receipts were sufficient to pay all expenses and provide a 
surplus. The increase in receipts was due to an additional 
enrolment of twenty students and to an advance in the tuition 
fee from $120 to $150 per year, made necessary by increased 
cost of operation. Investments also yielded a larger income 
because of more endowment and higher interest rates. 

By reference to Table IV, page 135, an analysis of the 
income and the expenses of the College of Liberal Arts as to 
source, purpose, and percentage of total, it will be seen that 
the income from students comprised 38.8 per cent of the 
total, an increase of 5.1 per cent, due mainly to the 25 per 
cent increase in tuition fee, and that income from endow- 
ments furnished 46 per cent of the total — a decrease of 3.1 
per cent. It may also be noted that the salaries for instruc- 
tional departments constituted 58.5 per cent of the total 
expenses, an increase of 1.3 per cent owing to increases in 
salary, while the cost of operation and maintenance of the 
physical plant was 16.8 per cent, a reduction from the previous 
year of 1.2 per cent. The instructional expense of all kinds 
was 62.8 per cent of the total, an increase of 1.6 per cent. 
It is gratifying to learn that a greater amount of the college 
income is being devoted to educational work, the real purpose 
of the college, and a smaller proportional sum to administra- 
tion and operation of plant. 



124 COLLEGE AND UNIVERSITY FINANCE 

The average attendance for the year was 464, and the 
total cost of running the college $190,642.45, a cost per student 
of $410.87. The average receipts from each student were 
$160.18, leaving $250.69 to be provided from other sources. 
For 1919-20 the cost per student was $391.36, and the aver- 
age receipts from each student $130.36, making it necessary to 
obtain from other sources $261 on account of each student. 
For each student, therefore, the college contributed on the 
average $10.31 less of the cost of his education than it did 
in 1919-20. 

In computing the cost of furnishing education to each 
student, in accordance with prevaiHng custom, no charge 
has been made for interest on cost of plant, nor for an amount 
to provide for its depreciation. If it is desired to include 
such charges, the amount invested in educational plant may 
be found by reference to Schedule III, page 149. 

SELF-SUPPORTING DEPARTMENTS 

As has been shown already, the activities which the 
college endeavors to operate on a self-supporting basis have 
met that expectation. The operations of the dormitories 
(Table V, page 136), however, barely met expenses and 
returned 4 per cent on cost and 2 per cent for depreciation. 
In fact. Carver Cottage failed to do so by $180.07. The net 
return has been carried to ''Reserves'^ for future expenses 
and equipment of the dormitories. It is evident that unless 
room rents are increased, or expenses reduced, either of 
which will be difficult to do, it will not be long before the 
dormitories will not yield 4 per cent on cost and provide for 
depreciation. 

The dining-halls (Table VI, page 137) yielded a surplus 
of $1,018, which, in accord with your policy, has been reserved 



TREASURER'S REPORT 125 

for their future needs. The college does not plan to make 
any profit for its own use from the boarding department. 

The bookstore (Table VII, page 138) paid all expenses and 
yielded a profit of $688.05, which has been carried to college 
'^ Surplus " for such use as the trustees may see fit. The sales 
of the store were $21,092.93, an increase of $3,084.72. 

The School of Music (Table VIII, page 139) paid all 
expenses, provided $800 for equipment replacement, and a 
net profit of $270.09, which has been put into college 
"Surplus." 

Annuity investments (Schedule II, page 148) produced 
income sufficient to pay all annuities and provide a remainder 
of $289.97, which has been put into annuity income reserve. 
This disposition of the surplus income is in harmony with 
the custom of the board that a reserve may be estabHshed 
so that annuities should not in any degree, even in a year 
when the payments exceed the income, diminish the income 
available for current purposes. 

BUILDING ADDITIONS AND NEW PLANS 

As stated on a preceding page, changes and additions to 
dormitories and residences were made (Schedule VII, page 
157) to bring them up to modern standards. The cost, 
$47,347.80, was defrayed from a fund generously provided 
by Mr. Samuel Chapin. The fund donated by Mr. Thomas 
French for a new building for the fine arts is being allowed 
to accumulate until building costs shall not exceed the sum 
available. It now stands at $52,250. He has added $5,000 
to his contribution for art equipment and collections, which, 
with accumulated interest, now amounts to $31,250. Most 
satisfactory progress has been made in obtaining funds for 
the Students' Christian Association and Recreation Building, 



126 COLLEGE AND UNIVERSITY FINANCE 

$20,000 having been contributed during the year by Mrs. 
Swift and Messrs. Bond, Smith, and Wilder. The fund and 
interest aggregate $63,360.45. Of this sum $1,760.80 was 
expended during the year for preHminary plans and expenses. 
Until operations are commenced the funds have been tempo- 
rarily invested in good short-term securities (Schedule IV, 
page 151). 

GIFTS 

Gifts actually paid to the college during the year totaled 
$71,745.61 (Table X, page 141). Of this amount $53,881.61 
was for capital, and $17,864 for current uses. Acknowledg- 
ment has been made to the donors, and the appreciation 
of the college is hereby pubHcly expressed for these welcome 
gifts for its needs. The total gifts received from the foimding 
of the college to date for all purposes amount to $2,961,382.50. 
A complete list of gifts to June 30, 1920, may be found in 
an appendix to the Treasurer's Report for 1919-20. 

auditor's report of examination 

The accounts, cash, and securities of the college have 
been examined and found correct by Messrs. Jones and 
Mudge. Their certificate will be found on page 127. 

Respectfully submitted, 

John Bounty, Treasurer 



TREASURER'S REPORT 127 

CERTIFICATE OF AUDITOR 

We have audited the accounts of College for 

the year ended June 30, 1921, and now certify that Tables 
I to X and Schedules I to XI, compiled by the treas- 
urer, are in accordance therewith, and also that the Balance 
Sheet, Table I, in our opinion, exhibits a true statement 
of the financial condition of the college as at that date. 

We have examined or traced by correspondence all the 
securities covering the investments and found them in order. 

The books are well kept and the files are in good order. 

Jones & Mudge, 

Certified Public Accountants 
Chicago, Illinois 
September 1, 1921 



The financial situation of 



FINANCIAL TABLE i' 

Balanc 

College at tl 



Dr. 



Permanent Fund Assets 

Investments of endowment funds 
(Schedule I. p. 144) 


$1,749,243.43 
18,181.34 


$1,767,424.77 
159,500.00 




Cash awaiting investment (Sched- 
ule V, p. 152) 








Investments of annuity funds 
(Schedule II, p. 148) 


$ 158,300.00 
1.200.00 




Cash awaiting investment (Sched- 
ule VI, p. 155) 










$ 512,580.80 
89,000.00 

149,262.70 


$1,926,924.77 


Plant Assets 

Buildings 


$ 750,843.50 

143,750.00 

1,349.65 


Grounds 




Books, equipment, and furniture 
(Schedule III, p. 150> 








Investments of building funds 
(Schedule IV, p. 151) 


$ 4,054.78 

14,000.00 
9,549.79 




Cash on hand (Schedule VII, 
p. 157) 






895,943.15 


Current Assets 
Cash 

Special purposes (Schedule 
VIII, p. 158) 


$ 27,604.57 
4,582.91 

6,810.27 
839.20 


General purposes, certificate of 
deposit 




General purposes 








Receivables 

Notes receivable (Schedule 
VIII, p. 158) 


$ 2,852.76 
840.15 
890.00 




Other notes receivable 

Accounts receivable 








Materials and supplies 

Bookstore, p. 138 


$ 1,602.01 

1,755.00 

635.18 

1,315.00 

1,503.08 




Dining-halls, p. 137 




Dormitories, p. 136 

Power plant, coal, etc., p. 140. 
Store-room 


■ 






Insurance Premiums 
Unexpired 








39,836.95 






Total 


$2,862,704,87 







:^D SCHEDULES 

I 

EET 

i of the fiscal year June 30, 


1921, is as follows: 




Cb. 


'ebmanent Funds 
Endowments (Schedule V, p. 152) 
Endowment funds subject to an- 
nuities (Schedule VI, p. 155) . . . 


$ 674,159.40 
74,923.30 


$1,767,424.77 
159,500.00 


$1,926,924.77 


'lant Funds 
Invested in plant 

o) From gifts and accumiila- 
tions 


$ 749,082.70 
146,860.45 


6) From current funds 




Building equipment funds (Sched- 
ule VII, p. 157) 


$ 750.00 

200.00 

7,462.13 






895,943,15 


UuEKENT Funds and Liabilities 
Current Liabilities 

Room deposits 


$ 8,412.13 

12,478.00 

850.00 

14,880.68 

3,216.14 


Key deposits 




Accounts payable 








Funds for designated purposes 
Special (Schedule VIII, p. 158) . 
General (Schedule IX, p. 161) . . 


$ 6,907.54 
5,570.46 




Income credits 

Room rent paid in advance 

Reserves (Schedule X, p. 162) . 
Surplus (Table II, p. 130) 




39,836.95 






Total 


$2,862,704.87 





130 COLLEGE AND UNIVERSITY FINANCE 

TABLE II 
Surplus and Deficit Account 1920-21 

The current operations of the college resulted in a total surplus of 
$3,293.88, shown below: 





Surplus 


Deficit 


College of Liberal Arts (Table III, p. 134) 


$ 986.34 

41.43 

1,018.00 

688.05 

270.09 

289.97 




Dormitories (Table V, p. 136) 




Dining-halls (Table VI, p. 137) 




Bookstore (Table VII, p. 138) 




School of Music (Table VIII, p. 139) 




Annuities (Schedule VI, p. 156) 








Sxirplus from current operations for the year 


$3,293.88 









Disposition of Surplus — 

Carried to dormitory equipment and expense 
reserve $ 41.43 

Carried to dining-hall equipment and ex- 
pense reserve 1 , 018 . 00 

Carried to annuity income reserve 289 . 97 



Total carried to "Reserves" (Schedule 

X), p. 162 $1,349.40 

Balance carried to surplus 1,944.48 



Balance in surplus July 1, 1920 $1,271 .66 

Added this year 1,944.48 

Balance in surplus July 1, 1921, carried to 

''Balance Sheet," p. 129 $3,216. 14 



;,293.88 



TREASURER'S REPORT 



131 



TABLE III 
College op Liberal Arts — Income 

The income for educational piu-poses for the year was $191,628.79, 
and for certain special objects in connection with the college it was 
$15,517.04, as follows: 





This Year 
1920-21 


Last Year 
1919-20 


Increase 


Decrease 


1 . Student fees 

Tuition 


S 69,576.30 

2,640.15 

1,950.00 

156.18 


$ 53,329.50 

2,610.30 

1,800.00 

140.92 


$16,246.80 

29.85 

150.00 

15.26 




Laboratory 




Matricvilation and graduation . . . 
Other fees and fines 










$ 74,322.63 


$ 57,880.72 


$16,441.91 




2. Income from endowments (net) 
General — unrestricted 


$ 54,876.44 
33,263.60 


$ 52,590.68 
31,755.46 


$ 2,285.76 
1,508.14 




General — restricted (Schedule 
IX, p 161) 










$ 88,140.04 


$ 84,346.14 


$ 3,793.90 




3. Gifts 

General (Table X, p. 143) 


$ 16,130.00 


$ 16,630.00 




$500.00 








$ 16,130.00 


$ 16,630.00 




$500.00 








4. Miscellaneous 

Rentals from dormitories, din- 
Sundry receipts 


$ 11,675.30 
1,360.82 


$ 11,675.30 
1,290.40 






$ 70.42 










$ 13,036.12 


$ 12,965.70 


$ 70.42 




Total income available for 
educational expense 


S191,628.79 


$171,822.56 


$20,306.23 


$500.00 


5. For specially designated pur- 
poses not a part of educa- 
tional expense 
Lectures — extra-curriculum 
Special (Schedule VIII, p. 
158) 


$ 1,500.00 

280.00 

6,900.78 

2,475.00 
310.00 




$ 1,500.00 




General (Schedule IX, p. 
160) 


$ 280.00 

4,500.26 

2,425.00 
210.00 




Scholarships (Schedule IX, 
p, 160) 


2,400.52 

50.00 
100.00 




Student aid (Schedule IX, 
p. 160) 




Prizes (Schedule IX, p. 161) . . 





132 



COLLEGE AND UNIVERSITY FINANCE 



TABLE lU— Continued 
College of Liberal Arts — Income 





This Year 
1920-21 


Tiflst Year 
1919-20 


Increase 


Decrease 


Dormitory (Underwood) Li- 
brary (Schedule IX, p. 161) 

Atiiletics (Schedule IX, p. 
161) 


$ 784.00 

3,001.40 

265.86 


$ 784.00 

2,560.18 

640.34 






$ 441.22 




Athletic field (Schedule IX, 
p 160) 


$374.48 










$ 15,517.04 


$ 11,399.78 


$ 4,491.74 


$374.48 


Total income 


S207,145.83 


$183,222.34 


$24,797.97 


$874.48 







TREASURER'S REPORT 



133 



TABLE III— Continued 
College of Liberal Arts — ^Expense 

The expenditures for educational purposes for the year were 
),642.45, and for special purposes connected with the college, but 
not a part of educational cost, $15,517.04. 





Tliis Year 
1920-21 


Last Year 
1919-20 


Increase 


Decrease 


Administration and general 
1. Executive oflSces 

Salaries 


$ 26,640.50 
4,360.20 

2,450.55 
2,590.70 

1,743.48 
960.12 


$ 25,340.00 
3,860.18 

2,043.91 
2,140.63 

1,721.31 
1,094.53 


$ 1,300.50 
500.02 

406.64 
450.07 

22.17 




Supplies and expense 

2, General 

Catalogues and publications . . 
Publicity 




Commencement and public 
occasions 




Miscellaneous 


$134.41 










$ 38,745.55 


$ 36,200.56 


$ 2,679.40 


$134.41 


Operation and maintenance of 
physical plant (Schedule XI, 
p. 163) 


$ 32,068.60 


$ 31,288.15 


$ 780.45 








Instructional 
1. Salaries 

College 


$103,218.75 
2,892.30 
1,041.75 

4,430.00 

2,628.42 

304.80 

75.30 

2,402.13 

2,615.24 

219.61 


$ 92,329.93 
2,584.23 
1,035.25 

3,430.00 

2,463.71 

296.18 

85.12 

2,143.97 

1,875.14 

33.50 


$10,888.82 

308.07 

6.50 

1,000.00 

164.71 
8.62 




Library 




Sherman Museum 




Premiums — ^retiring allow- 
ances 




2. Supplies and expenses 

College 




Library 




Sherman Museum 


$ 9.82 


3. Equipment and books — edu- 
cational 
College 


258.16 
740.10 
186.11 




Library 




Sherman Museum 










$119,828.30 


$106,277.03 


$13,561.09 


$ 9.82 


Total expense for educa- 
tional purposes 


$190,642.45 


$173,765.74 


$17,020.94 


$144.23 







134 



COLLEGE AND UNIVERSITY FINANCE 



TABLE III— Continued 
College op Liberal Arts — ^Expense 





This Year 
1920-21 


Last Year 
1919-20 


Increase 


Decrease 


BvOUOhit fOTWOiTdt • 


$190,642.45 


$173,765.74 


$17,020.94 


$144.23 






4. For specially designated pur- 
poses 
Lectiires — extra-curriculum 
Special (Schedule VIII, 
p. 158) 


$ 1,500.00 

280.00 

6,900.78 

2,475.00 
310.00 

784.00 
3,001.40 

265.86 




$ 1,500.00 




General (Schedule IX, 
p 160) 


$ 280.00 

4,500.26 

2,425.00 
210.00 

784.00 
2,560.18 

640.34 




Scholarships (Schedule IX, 
p. 160) 


2,400.52 

50.00 
100.00 




Student aid (Schedule IX, 
p. 160) 




Prizes (Schedule IX, p. 161) . . 

Dormitory (Underwood) Li- 
brary (Schedule IX, p. 161) 

Athletics (Schedule IX, p. 161) 

Athletic field (Schedule IX, 
p 160) 




441.22 


$374.48 










$ 15,517.04 


$ 11,399.78 


$ 4,491.74 


$374.48 




$206,159.49 


$185,165.52 


$21,512.68 


$518.71 



Summary 



Total income (p. 132) .... 
Total expense (see above) , 



Deficit 1919-20 

Surplus 1920-21 (Table II, 
p. 130) 



$207,145.83 
206,159.49 



986.34 



$183,222.34 
185,165.52 



$ 1,943.18 



$24,797.97 
21,512.68 



$ 3,285.29 



$874.48 
518.71 



$355.77 



TREASURER'S REPORT 



135 



TABLE IV 

Analysis of Income and Expense of College of Liberal Arts 

Analysis of the income and expenses (excluding items for specially- 
designated purposes of $15,517.04 in 1920-21 and $11,399.78 in 1919-20, 
which do not enter into the cost to the college of furnishing instruction to 
the students) shows the following as to source, purpose, and percentage 
of total: 

Income 





1920-21 


1919-20 




Amount 


Per- 
centage 


Amount 


Per- 
centage 


Student fees 


$ 74,322.63 
88,140.04 
16,130.00 
13,036.12 


38.8 

46.0 

8.4 

6.8 


$ 57,880.72 
84,346.14 
16,630.00 
12,965.70 


33.7 


Income from endowments 


49.1 


Gifts 


9.7 


Miscellaneous (rentals, etc.) 


7.5 


Totals 


S191,628.79 


100.0 


$171,822.56 


100.0 







Expenses 



Administration and general 

Executive oflSces 

General 

Operation and maintenance of physi- 
cal plant 

Instructional 

Salaries 

Supplies and expenses 

Equipment and books 

Totals 



$ 31,000.70 
7,744.85 


16.3 
4.1 


32,068.60 


16.8 


111,582.80 
3,008.52 
5,236.98 


58.5 
1.6 

2.7 


$190,642.45 


100.0 



29,200.18 
7,000.38 

31,288.15 

99,379.41 
2,845.01 
4,052.61 



$173,765.74 



16.8 
4.0 

18.0 

57.2 
1.7 
2.3 



100.0 



136 



COLLEGE AND UNIVERSITY FINANCE 



TABLE V 
Dormitories 

The current operations of the dormitories for the year 1920-21 
resulted in a gain from the two larger buildings and a loss on the cottage, 
a net gain of $41.43, as shown below: 





Christie 
Hall 


Underwood 
HaU 


Carver 
Cottage 


Totals 


Receipts 

Rent of rooms 


$ 


7,670.00 


$ 7,480.00 


$ 1,575.00 


$16,725.00 






Disbursements 

Supplies, including inventory of 
July 1, 1920 


$ 


628.32 
235.20 


$ 664.80 
267.53 


$ 282.30 
132.45 


$ 1,575.42 


Less inventory of supplies of June 
30, 1921 


635.18 






Net cost of supplies used 


$ 


393.12 

1,432.41 

500.00 

3,364.20 

1,200.00 

300.00 

108.00 

131.40 

72.50 


$ 397.27 

1,596.29 

528.26 

3,264.00 

1,000.00 

280.00 

200.00 

108.80 

52.25 


$ 149.85 

288.31 

39.78 

780.00 

300.00 

108.00 

52.00 

26.00 

11.13 


$ 940.24 


Services 


3,317.01 


Repairs — buildings and equipment . 
Rent, including charge for deprecia- 
tion 


1,068.04 
7,408.20 


Heat 


2,500,00 


Light 


688.00 


Water 


360.00 


Insurance 


266.20 


Miscellaneous 


135.88 






Total 


$ 


7,501.63 


$ 7,426.87 


$ 1,755.07 


$16,683.57 








$ 


168.37 


$ 53.13 








$ 180.07 












Net gain carried to "Surplus Ac- 
count " Table II p 130 . 








$ 41.43 













TREASURER'S REPORT 137 

TABLE VI 
Dining-Halls 

The current operations of the dining-halls for the year 1920-21 
yielded a net gain of $1,018, as shown below: 



Christie 
HaU 



Receipts 

From meak served. 



Disbursements 
Subsistence and supplies, including inven- 
tory of July 1, 1920 

Less inventory of June 30, 1921 



Net cost of supplies and subsistence used. 

Services (salaries and wages) , 

Laundry 

Repairs 

Rent, including charge for depreciation . , 

Heat 

Light 

Water 

Insurance 

Miscellaneous 



Total. 



Gains 

Total gain transferred to "Surplus Ac- 
count," Table II, p. 130 



$14,652.63 



7,313.24 
820.00 



6,493.24 

4,200.00 

997.23 

497.90 

975.10 

570.00 

142.00 

148.00 

68.00 

48.16 



$14,139.63 



$ 513.00 



Underwood 
Hall 



$17,028.48 



8,937.17 
935.00 



8,002.17 

5,026.00 

984.18 

390.00 

1,022.00 

630.00 

180.00 

172.00 

70.00 

47.13 



$16,523.48 



$ 505.00 



Totals 



$31,681.11 



$] 6,250.41 
1,755.00 



$14,495.41 

9,226.00 

1,981.41 

887.90 

1,997.10 

1,200.00 

322.00 

320.00 

138.00 

95.29 



$30,663.11 



$ 1,018.00 



138 COLLEGE AND UNIVERSITY FINANCE 

TABLE VII 
College Bookstoke 

The current operations of the college bookstore for 1920-21 
resulted in a net gain of $688.05, as shown below: 

Receipts 

Sales $21,092.93 

Disbursements 

Books and merchandise, including in- 
ventory of July 1, 1920 $20,401 .23 

Less inventory of June 30, 1921 1 , 602 . 01 

Cost of stock sold $18,799.22 

Salaries and wages 1 , 233 . 42 

Freight and cartage 83 . 24 

Repairs 16 . 00 

Rent, including charge for depreciation 

and interest 120.00 

Postage 30.00 

Insurance 75 . 00 

Miscellaneous 48.00 

Total $20,404.88 

Gain transferred to "Surplus Account," Table II, 
p. 130 $ 688.05 



TREASURER'S REPORT 139 

TABLE VIII 

School of Music 

The current operations of the School of Music for the year 
1920-21 resulted in a total net gain of $270.09, as shown below: 

Receipts 

Fees $13,037.83 

Concerts and recitals 1 , 630 . 00 

Miscellaneous 237.28 

Total $14,905.11 

Disbursements 

Administrative 

a) Salaries $ 1,280.00 

b) SuppHes and expense 128 . 00 

General 

a) Concerts and recitals 1 , 780 . 00 

6) Miscellaneous 86.00 

Operation and maintenance of physical 
plant 

a) Equipment repairs 246 . 52 

b) Reserve to replace equipment 
(credited to "Equipment Re- 
serve") 800.00 

c) Heat 760.00 

d) Light 290.00 

e) Water 80.00 

/) Rent 2,150.00 

g) Insurance 80 . 00 

Instructional 

a) Salaries 6,718.50 

b) SuppHes and expense 236 . 00 

Total 14,635.02 

Gain transferred to "Surplus Account," Table II, 
p. 130 1 270.09 



140 



COLLEGE AND UNIVERSITY FINANCE 



TABLE IX 

Heat, Light, Power, and Water Account 

The total cost of supplying heat and water, electric light and 
power for the year 1920-21 amounted to $21,535. The itemized 
list of disbursements for supplying this service, together with the 
distribution of this cost between the academic and the income- 
producing activities of the college is shown below: 

Disbursements 

Engineer's office 

Salaries $1,920.00 

SuppHes and expense 38 . 00 

Wages of power-plant employees 2 , 945 . 00 

Fuel and freight, including in- 
ventory of July 1, 1920 ... 9 , 830 . 00 

Electric current 2,888.00 

Water 1,132.00 

Repairs — building and equip- 
ment 1,563.00 

Reserve to replace boilers and 
equipment (credited to 
"Equipment Reserve")- • • 2,000.00 

Supplies and expense 498 . 00 

Insurance 36 . 00 



$22,850.00 
Inventory of coal and suppHes, 

June 30, 1921 1,315.00 

Total expense of year 1920-21 $21,535.00 

DISTRIBUTION OF TOTAL EXPENSE 





Heat 


Light and 
Power 


Water 


Totals 


College 


$13,055.00 

760.00 

2,500.00 

1,200.00 


$ 1,588.00 
290.00 
688.00 
322.00 


$ 372.00 

80.00 

360.00 

320.00 


$15,015.00 


School of Music 


1,130.00 


Dormitories 


3,548.00 


Dining-halls 


1,842.00 






Totals 


$17,515.00 


$ 2,888.00 


$ 1,132.00 


$21,535.00 







Note. — A proportionate amount of interest on cost of power plant has been 
included in sums charged to the School of Music, dormitories, and dining-halls, and 
deducted from the college's share of expense^ 



TREASURER'S REPORT 141 

TABLE X 

Gifts Paid In during the Fiscal Year Ending June 30, 1921 

The total gifts received by the college during the year for 
additional construction, equipment, and for current uses amounted 
to $71,745.61, distributed as follows: 

SUMMARY 

I. Capital account 

1. For additional endowment $27 , 420 . 21 

2. For buildings and equipment 26,461 .40 

$53,881.61 
II. Current uses 17,864.00 



Total $71,745.61 



details 
I. Capital account 

1. For additional endowment 
a) General 
1908 Fund 

James Brown $ 300.00 

Mary Grey 100.00 

John Lamson , 17 . 00 

$ 417.00 
1913 Fund 

Jane Jones $ 2.43 

Patriotic Fund 

William Amster 50 . 00 

Class of 1910 

Charles Henry 40 . 00 

Undesignated 

A friend 1,150.00 

Alumni Association 

First instahnent .... 21 , 148 . 78 



$22,808.21 



142 COLLEGE AND UNIVERSITY FINANCE 

TABLE X— Continued 
Brought forward $22,808.21 

h) Restricted 

Sherman Museum 

James T. Sherman. . $ 612 . 00 
Scholarships 
Mary W. Ladd, for 
tuition of boys 
living in Smith 
County (subject to 
5 per cent annuity) 4 , 000 . 00 

4,612.00 

$27,420.21 

2. For buildings and equip- 
ment 

a) Buildings 
Students' Christian As- 
sociation and Rec- 
reation Building 

Mrs. A. B. Swif t . . . . $15 , 000 . 00 

Henry Bond 3,500.00 

Justin Smith 1,000.00 

Charles Wilder 500 . 00 

$20,000.00 
RemodeUng dormito- 
ries and residences 
Samuel Chapin (to 
complete fund) ... 1 , 373 . 60 

b) Equipment 
Art Department 

Additional sum from 

Thomas French . . 5 , 000 . 00 

Carried forward . . $26 , 373 . 60 $27 , 420 . 21 



TREASURER'S REPORT 143 

TABLE X— Continued 
Brought forward . . $26 , 373 . 60 $27 , 420 . 21 

Dormitories and resi- 
dences furniture 
Samuel Chapin (to 
complete fund) ... $ 87 . 80 

26,461.40 

$53,881.61 
II. Current uses 

1. For Student Loan Fund 

Class of 1914 .....$ 234.00 

2. Included in income of College of Lib- 

eral Arts 

a) Books 

George Walker for 

English books $ 500 . 00 

Richard Olney for 

mathematic books.. . 200.00 

700.00 

b) Scholarships 

James Read for local students. . 200.00 

c) Prizes 

Charles Howe for best essay on 
"Civil Government" 100.00 

d) General expenses 

Northwest Synod $12,430.00 

Mary Avery 1,200.00 

Alumni Association. . . 2,500.00 

16,130.00 

3. For student aid 

Noah Jones 500.00 

17,864.00 

Total $71,745.61 



144 



COLLEGE AND UNIVERSITY FINANCE 



SCHEDULE I 

Investment of Endowment Funds 

The endowment funds of the college on June 30, 1921, were invested 
as indicated by the following summary and lists of investments: 



Summary 





Amount 


Per- 
centage 
of Total 


Average 
Yield 


I. Funds consolidated 

1. Real estate owned (see p. 145) 

2 Bonds (see p. 145) 


$ 126,000.00 

475,212.60 

41,643.83 

1,040,545.00 


7.5 

28.2 

2.5 

61.8 


5.84 
4.98 


3 Stocks (see p. 145) 


6.9 


4. Real estate mortgages (see p. 146) . . 


5.95 


Total 


$1,683,401.43 


100.0 


5.69 






II. Funds separately invested 

1 Bonds (see p. 147) 


$ 12,840.00 
53,002.00 


19.5 
80.5 


4.4 


2 Stocks (see p. 147) 


7.1 






Total 


$ 65,842.00 


100.0 


6.6 






Total carried to "Balance Sheet," 
p 128 


$1,749,243.43 













TREASURER'S REPORT 



145 



SCHEDULE I— Continued 
Investments of Endowment Funds in Detail 





Face Value 


Cost 


I. Funds consolidated 
1. Real estate owned 

a) Business building in Chicago 




$ 75,509 10 


6) Business building in Minneapolis 




50,490.90 








Total — ^real estate 




$ 126,000.00 








2. Bonds 
a) Railway 

A.T. & S.F. Ry. Co. 4's 


$ 25,000.00 

25,000.00 

25,000.00 

357,500.00 


$ 18,962 50 


C.C.C. & St.L. Ry. Co. Equipt. 

6's 


25,000 00 


K.C. Terminal Ry. 4's 


24,250 00 


Other bonds to be listed in report 


349,250.00 






Total 


$432,500.00 


$ 417,462 50 






6) Public utility 

Havana Electric Co. 5's 


$ 35,000.00 


$ 30,800 00 






c) Industrial 

Western Electric Co. 5's 


$ 2,500.00 


$ 2,479 38 






d) Government and municipal 

Chicago West Park Com. 4's 


$ 10,000.00 
4,400.00 
7,000.00 
3,000.00 


$ 10 080 72 


U.S. 1st Liberty Loan 3 14% 


4,390 00 


U.S. 3d Liberty Loan 4 M % 


7,000 00 


U.S. 4th Liberty Loan 4M% 


3,000 00 






Total 


S 24,400.00 


$ 24,470.72 




Total bonds 


$494,400.00 


$ 475 212 60 






3. Stocks 
a) Railway 

200 shares C, St.P., M.&O. Ry. 

Co. Pref. 7% 


20,000.00 
21,000.00 


$ 19,600.00 
22,043.83 


6) Industrial 

210 shares U.S. Steel Corp. Pref. 

7% 




Total 


41,000.00 


$ 41,643.83 











146 COLLEGE AND UNIVERSITY FINANCE 

SCHEDULE I— Continued 



Real estate mortgages 
o) City mortgages 

Illinois-Chicago 

Wisconsin— Milwaukee . . 

Minnesota-Minneapolis . 



6) 



Total city mortgages . 

Farm mortgages 

Illinois 

Indiana 

Iowa 

Minnesota "... 

South Dakota 

Washington 

Wisconsin 



Total farm mortgages 

Total real estate mortgages. 



Number 
of Loans 



39 
9 
37 
30 
19 
15 
50 



199 



205 



Amount 



35,000.00 
55,000.00 
14,270.00 



$ 104,270.00 



141,225.00 
42,000.00 

233,800.00 

123,700.00 
68,000.00 
63,100.00 

264,450.00 



$ 936.275.00 



$1,040,545.00 



Mortgage loans classified as to interest rate 

16 at 5% $ 128,445.00 

25 at 5%% 203,000.00 

147 at 6% 582,200.00 

17 at 7% 126,900.00 



205 



.$1,040,545.00 



Average rate 5.95% 



TREASURER'S REPORT 
SCHEDULE I— Continued 



147 



II. Funds separately invested 
The Joseph Hamm Fund 

A.T. S.F. Ry. Co. Pref. Stock 6% 

Evansville & Terre Haute Ry. Co. 1st Mortgage 

6% Bonds 

Northern Pacific Ry. Co. Prior Lien 4% Bonds. . . 
Union Pacific R.R. and Land Grant 4% Bonds . . 

The William Bushnell Fund 

Inland Steel Co. 1st Mortgage 6% Bonds 

The Fleugel Field Fund 

United Light & Ry. Co. Pref. Stock 6% 

The J. T. Sherman Fund 

Consumers Co. Pref. Stock 7% 

Consumers Co. Com. Stock 7 % 

Northern States Power Co. Pref. Stock 7% 

Total 

III. Classification 

1, Bonds 

Railway 

Industrial 

2. Stock 

Railway 

Public Utility 

Indiistrial 

Total 



Face Value 



$16,000.00 

1,000.00 
6,000.00 
5,000.00 



$28,000.00 



$ 1,000.00 



$12,500.00 



$10,000.00 

8,600.00 

11,000.00 



$29,600.00 



$71,100.00 



$12,000.00 
1,000.00 



$13,000.00 



$16,000.00 
23,500.00 
18,600.00 



$58,100.00 



$71,100.00 



Cost 



$16,160.00 

1,000.00 
5,940.00 
4,900.00 



$28,000.00 



$ 1,000.00 



$11,500.00 



$ 8,300.00 
7,912.00 
9,130.00 



$25,342.00 



$65,842.00 



$11,840.00 
1,000.00 



$12,840.00 



$16,160.00 
20,630.00 
16,212.00 



$53,002.00 



$65,842.00 



148 



COLLEGE AND UNIVERSITY FINANCE 



SCHEDULE II 

Investment of Annuity Funds 



SUMMAKY 



I. Funds consolidated (see below) 

II. Funds separately invested (see below) 

Total carried to "Balance Sheet," p. 128 



Cost 



$ 68,300.00 
90,000.00 



$158,300.00 



Investments in Detail 



Face Value 


Cost 


I. Funds consolidated 
1. Bonds 

A T & S F Ry. Co. General 4's 


$20,000.00 
25,000.00 
10,000.00 


$18,400.00 


So Dak Rural Credit 5's 


25,000.00 


U S 4th Liberty Loan 4i^% 


8,870.00 








$55,000.00 


$52,270.00 


2. Mortgages 




$16,030.00 








Total funds consolidated 




$68,300.00 








II. Funds separately invested 

1. The George Bouton Annuity Fund 

Black Mill & Lumber Co. Com. Stock 7 % 

Pullman Co Com Stock 8% 


$15,000.00 

5,600.00 

15,000.00 


$15,797.00 
9,128.00 


Bogue Phalia Drain Dist Bonds 6% 


15,075.00 








$35,600.00 


$40,000.00 


2. The Joel Polleus Annuity Fund 

Consumers Co. Pref. Stock 7% 


$20,000.00 
17,200.00 
17,000.00 


$16,600.00 


Consumers Co Com. Stock 7 % 


15,824.00 


United Light & Ry Co Pref Stock 6 % 


17,576.00 








$54,200.00 


$50,000.00 


Total funds separately invested 




$90,000.00 









TREASURER'S REPORT 



149 



SCHEDULE III 

Buildings, Grounds, and Equipment 

The total cost of the college campus, buildings, and equipment on 
June 30, 1921, amounted to $750,843.50, divided as follows: 





Inventory 
Value 


Cost 


1. Buildings 

2. Grounds 

3. Equipment 


$563,600.00 

89,000.00 

171,650.00 


$512,580.80 

89,000.00 

149,262.70 


Total carried to "Balance Sheet," p. 128 .. . 


$824,250.00 


$750,843.50 





Type 


Built 


Cubical 

Contents 

Cu. Ft. 


Additions 
during Year 


Cost 
June 30, 1921 


1. Buildings — 
a) Educational 

Art Hall 


Frame 

Stone 

Brick and 

steel 

Stone 

Stone 

Stone 

Stone 

Stone 

Brick 

Brick and 

concrete 

Stone 


1883 
1858 
1892 

1882 
1868 
1850 
1880 
1855 
1878 
1910 

1860 


50,300 
340,000 
520,000 

250,500 
128,000 
150,000 
420,400 
110,000 
60,200 
580,000 

180,800 




$ 5,000.00 
34,300 00 


Chapel 




Gymnasium 




42,560 00 


Library 




50,000 00 


Memorial Hall. . . 




22,000.00 


Middle Hall 




12,000.00 


Music Hall 




30,000.00 


North Hall 




11,000.00 


Observatory 




8,000.00 


Science Hall 




82,000.00 


South Hall 




20,000.00 








Total 






2,790,200 




$316,860.00 












6) Dormitories 
Men 

Christie Hall . . . 
Stetson Lodge . . 
Women 

Carver Cottage . 


Brick 
Brick 

Frame 
Brick 

Frame 
Frame 
Brick 
Frame 
Frame 


1870 
1921 

1900 
1890 

1890 
1900 
1860 
1880 
1910 


250,000 
110,000 

68,000 
250,000 

80,000 
20,000 
90,000 
32,000 
18,000 


(1) $15,000.00 
(1) 16,000.00 


$ 49,650.00 
16,000.00 

10,000.00 


Underwood Hall 
c) Residences 

Dean's 


(1) 3,000.00 
(1) 3,000.00 


48,000.00 
17,000.00 


Nelson Cottage . . . 


3,000.00 


President's 




15,300.00 


Sulzer Cottage. . . 




5,300.00 


Superintendent's. . 




2,630.00 








Total 






918,000 


(1) $37,000.00 


$166,880.00 











150 



COLLEGE AND UNIVERSITY FINANCE 
SCHEDULE HI— Continued 





Type 


Built 


Cubical 

Contents 

Cu. Ft. 


Additions 
during Year 


Cost 
June 30, 1921 


d) Central Heating 
Plant 


Brick and 
concrete 


1910 


130,000 




$ 27,080.00 








e) S. C. A. and Rec- 
reation Building 
under construc- 
tion .... ... 








(1)$ 1,760.80 


$ 1,760.80 












Total buildings 








(1) $38,760.80 


$512,580.80 













Additions 
diiring Year 



Cost 
June 30, 1921 



Grounds 

Campus — 160 acres. . . . 

Fleugel Field (athletics) - 

Total grounds 



Equipment 

Books 

Scientific equipment , 
Furniture 



Total equipment . 



87,000.00 
2,000.00 



$ 89,000.00 



(2) $ 3,050.00 



(1) 10,347.80 



$ 76,080.40 
20.140.30 
53,042.00 



$13,397.80 



$149,262.70 



Note. — Items under "Additions" marked (1) are provided from special funds, 
see Schedule VII, p. 157; the item marked (2) was provided by $700 from gifts, see 
p. 143, and $2,350 from current funds. 



TREASURER'S REPORT 
SCHEDULE IV 



151 



Temporary Investments of Building and Equipment Funds 

On June 30, 1921, $143,750 of the iunds available for building 
construction and the piirchase of new equipment were temporarily- 
invested as follows : 





Face Value 


Cost 


Certificate of Deposit First National Bank — 4% 

U S Treasury Certificates — 5 ^% 


$35,000.00 
90,000.00 
19,000.00 


$ 35.000.00 
90,000.00 


Michigan Central Ry. Equipt. Bonds — 6% 


18,750.00 






Total carried to "Balance Sheet," p. 128 




$143,750.00 









152 COLLEGE AND UNIVERSITY FINANCE 

SCHEDULE V 

Endowment Funds 

The endowment funds of the college amounted on June 30, 1921, to 
$1,767,424.47. The amount invested and cash uninvested on that 
date, and the objects for which the income was used, are shown below: 



Name and Object 



Amount on 
July 1, 1920 



Additions 
1920-21 



Deductions Amount on 
1920-21 June 30, 1921 



I. Unrestricted 

II. Restricted 

1. President 

2. Professorships. . . . 

3. Departmental. . . . 

4. Lectureships 

5. Books 

6. Building mainte- 
nance 

7. Grounds mainte- 
nance 

8. Scholarships 

9. Student aid 

10. Prizes 

11. Dormitory library. 
III. Loss, gain, and premi- 
um 



$ 968,673.15 

40,000.00 

367,263.71 

35,730.00 

5,000.00 

32,415.00 

105,159.55 

11,500.00 

100,653.55 

40,000.00 

4,500.00 

14,000.00 

20,560.82 



Total. 



$1,745,455.78 



Total carried to "Bal- 
nace Sheet," p. 129.. 

Invested (Schedule I, 
p. 144) 



22,808.21 $ 281.57 



612.00 



3,000.00 



3,579.48 



$ 29,999.69 



7,000.00 



749.13 



$ 991,199.79 

40,000.00 

367,263.71 

36,342.00 

5,000.00 

32,415.00 

105,159.55 

11,500.00 

103,653.55 

33,000.00 

4,500.00 

14,000.00 

23,391.17 



$ 8,030.70 



$1,767,424.77 



$1,749,243.43. 



Cash awaiting invest- 
ment ("Balance 
Sheet," p. 128) 



18.181.34. 



Funds consolidated, 
P- 154 $1,701,582.77 

Invested $1,683,401.43 

Cash awaiting invest- 
ment 18,181.34 



Funds separately in- 
vested, p. 154 65,842.00 

Invested $ 65,842.00 

Total $1,767,424.77 



TREASURER'S REPORT 
SCHEDULE Y— Continued 



153 



Name and Object 


Amount on 
July 1, 1920 


Additions 
1920-21 


Deductions 
1920-21 


Amount on 
June 30, 1921 


A. Funds consolidated — 
I. Unrestricted 

Alumni Fund . ... 




$21,148.78 




$ 21,148.78 


1901 Fund 


$328,083.22 
110,946.58 
386,765.37 

425.00 
742.00 

26,066.00 
100,000.00 

15,644.98 




328,083.22 


1908 Fund. , . . 


417.00 
2.43 




111,363.58 


1913 Fund 


Exp. 

$281.57 


386,486.23 


Class of 1900 . . . 


425.00 


Class of 1910 


40.00 
50.00 




782.00 


Patriotic Fund . . . 




26,116.00 


Pearson Fund 




100,000.00 


Undesignated. . . . 


1,150.00 




16,794.98 








Total 


$968,673.15 


$22,808.21 


$281.57 


$991,199.79 






II. Restricted 

1. President 


$ 40,000.00 






$ 40,000.00 










2. Professorships 

Alumni . . 


$ 20,805.88 

5,000.00 

14,865.00 

326,592.83 






$ 20,805.88 


Borden 






5,000.00 


Brewer. . 






14,865.00 


Others (list in detail) . . . 






326,592.83 










Total 


$367,263.71 






$367,263.71 










3. Departmental 

Biblical (Blake) .... 


$ 1,000.00 
10,000.00 






$ 1,000.00 


Art (Elsom) 






10,000.00 










Total 


$ 11,000.00 






$ 11,000.00 










4. Lectureships 

Phillips Missionary. . . . 


$ 3,000.00 
2,000.00 






$ 3,000.00 


Schnaelzer Memorial. . . 






2,000.00 










Total 


$ 5,000.00 






$ 5,000.00 










5. Books 

Academy 


$ 500.00 

500.00 

5,000.00 

26,415.00 






$ 500.00 


Burnside 






500.00 


Carey 






5,000.00 


Others (list in detail) . . . 






26,415.00 










Total 


$ 32,415.00 






$ 32,415.00 










6. Building maintenance 
Observatory 


$ 7,000.00 

88,506.09 

9,653.46 






$ 7,000.00 


Science Hall 






88,506.09 


South Hall 






9,653.46 










Total 


$105,159.55 






$105,159.55 











154 



COLLEGE AND UNIVERSITY FINANCE 
SCHEDULE Y— Continued 



Name and Object 


Amount on 
July 1, 1920 


Additions 
1920-21 


Deductions 
1920-21 


Amount on 
June 30, 1921 


8. Scholarships 

Sunn . . . . 


$ 3,500.00 






$ 3,500.00 


Clark 


Tfr. 
$ 3,000.00 




3,000.00 




1,000.00 
96,153.55 




1,000.00 


Others (list in detail) . . . 






96,153.55 








Total 


$100,653.55 


3,000.00 




$103,653.55 








9. Student aid 

Dowling Memorial.. . . 
Education 


$ 1,000.00 
4,000.00 






$ 1,000.00 






4,000.00 










Total 


S 5,000.00 






$ 5,000.00 










10. Prizes 

Art Essay 


$ 500.00 
1,000.00 
1,000.00 
1,000.00 






$ 500.00 








1,000.00 


IVIoehlman Memorial . . 






1,000.00 


Russell Memorial 






1,000.00 










Total 


$ 3,500.00 






$ 3,500.00 










11. Dormitory Library 


$ 14,000.00 






$ 14,000.00 










III. Loss, gain, and premium. . . 


$ 20,560.82 


$ 3,579.48 


$ 749.13 


$ 23,391.17 


Total funds consoli- 
dated 


$1,673,225.78 


$29,387.69 


$ 1,030.70 


$1,701,582.77 






B. Funds separately invested — 
Restricted 
3 Sherman Museum 


$ 24,730.00 


$ 612.00 




$ 25,342.00 








7. Grounds maintenance 
Fleuffel Field 


$ 11,500.00 






$ 11,500.00 










9, Student aid 

Hamm, Joseph 


$ 35,000.00 




$ 7,000.00 


$ 28,000.00 








10. Prizes 


$ 1,000.00 






$ 1,000.00 










Total funds separately 
invested 


$ 72,230.00 


$ 612.00 


$ 7.000.00 


$ 65,842.00 



TREASURER'S REPORT 



155 



SCHEDULE VI 

Annuities 

Endowment funds of the college subject to annuities amounted 
on June 30, 1921, to $159,500. The amounts invested and the cash 
uninvested, the objects for which estabhshed, the name of the annui- 
tants, and the disposition of the surplus are indicated below: 



Name and Object 


Amount on 
July 1, 1920 


Additions 


Deductions 


Amount on 

June 30, 

1921 


Rate of 
Annuity 

(Per- 
centage) 


Summary 
I, Annuities consoli- 
dated 


$ 68,500.00 
90,000.00 


$4,000.00 


$ 3,000.00 


$ 69,500.00 
90,000.00 




II. Annuities sepa- 
rately invested. 










Total 


$158,500.00 


$4,000.00 


$ 3,000.00 








$159,500.00 




Total carried to "Bal- 
ance Sheet," p. 129. 














Schedule II, p. 148) $158,300.00 

Cash carried to "Bal- 

anceSheet,"p. 128 1,200.00 




Annuities in detail 
I. Annuities consoli- 
dated 
1. General endow- 
ment 
Ben] . L. Smith . 


$ 10,000.00 

25,000.00 
25,000.00 

3,000.00 
3,000.00 






$ 10,000.00 

25,000.00 
25,000.00 


5 


2. Instruction 
James S. Ginn, 






4 


Thos. P. Moore 






4J^ 


3. Scholarships 
Nath'l Clark. . . 




Tfr. 
$ 3,000.00 




John S. Hunt . 




3,000.00 
4,000.00 
2,500.00 


4 


Mary W. Ladd. 


$4,000.00 




5 


Ann Minot .... 


2,500.00 




4 










Total . . . 


$ 68,500.00 


$4,000.00 


$ 3,000.00 


$ 69,500.00 








II. Annuities sepa- 
rately invested 
1. General endow- 
ment 
George Bouton. 


$ 40,000.00 
50,000.00 






$*40,000.00 
*50,000.00 




4. Library main- 
tenance 
Joel PoUeus . . . 
















Total .... 


$ 90,000.00 






$ 90,000.00 













Original gift; net income paid to annuitants. 



156 



COLLEGE AND UNIVERSITY FINANCE 
SCHEDULE Yl— Continued 





Income 
Received 
1920-21 


Annuities 

Paid 
1920-21 


Balance in 

Excess of 

Annuities Paid 


I. Annuities consolidated 


$3,364.97 
6,022.00 


$3,075.00 
6,022.00 


$289.97 


II. Annuities separately invested 










$9,386.97 


$9,097.00 




Carried to "Surplus Account," Table II, 
p. 130 


$289.97 











TREASURER'S REPORT 



157 









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COLLEGE AND UNIVERSITY FINANCE 



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162 



COLLEGE AND UNIVERSITY FINANCE 



SCHEDULE X 

Reserves 

During the year Reserves were increased by $4,149.40 as shown 
below: 



Equipment and expense 

Dormitories 

Dining-halls 

Power plant 

School of Music .... 
Annuity income reserve. 



Total. 



Total reserves carried to Balance Sheet, 
p. 129 



Balance 
July 1, 1920 



$ 4,418.72 

2,582.10 

2,100.00 

660.00 

970.46 



$10,731.28 



Added 
during 
1920-21 



Balance 
June 30, 1921 



41.43 

1,018.00 

2,000.00 

800.00 

289.97 



$ 4,149.40 



$ 4,460.15 
3,600.10 
4,100.00 
1,460.00 
1,260.43 



$14,880.68 



TREASURER'S REPORT 



163 



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164 COLLEGE AND UNIVERSITY FINANCE 

NOTES ON TABLES AND SCHEDULES IN ANNUAL EEPORT 

The following notes do not form a part of the annual 
report and should not be included in the treasurer's report. 
They are inserted here only for the purpose of assisting the 
financial officers. 

Table I. — This table gives the total assets of the college, 
$2,862,704.87, and shows of what they are composed, 
namely: $1,926,924.77 permanent fund assets, 67.3 per cent 
of the total; $895,943.15 buildings, grounds and equipment, 
and building funds temporarily held, 31.3 per cent of the 
total, and the remainder, $39,836.95 current assets, 1.4 
per cent of the total. The permanent funds are accounted 
for exactly by investments and cash awaiting investment. 
The manner in which the plant funds have been used is 
shown, and the amount and disposition of building and equip- 
ment funds being held for new construction are indicated. 
The constituent parts of current assets and current funds and 
liabilities are enumerated, and the financial condition of the 
college in this respect shown to be good. Thus, to meet 
the accounts payable of $7,462.13 there is cash of $9,549.79. 
The sum to the credit of special funds for designated 
purposes, $6,907.54, is offset by assets of cash, $4,054.78, 
and notes receivable, $2,852.76, while reserves, $14,880.68, 
are shown to be invested in a certificate of deposit of $14,000 
and the remainder in cash. The remainder of the cur- 
rent funds, $10,586.60, consisting of credits to accounts, 
which the college as a going concern will have always, is 
accounted for by sundry good current assets of a sort which 
likewise will usually be found in a college in operation. 

The accounts given in this table in totals only are fully 
explained in Schedules I to X, to which reference is made by 
number and page so that anyone desiring to learn the par- 
ticulars may be able to do so. 



TREASURER'S REPORT 165 

From Table I the reader should be able to obtain a clear 
idea of the college's financial condition on June 30, 1921. 

Table II. — From this table the surplus resulting from 
current operations, its sources and disposition may be 
ascertained. The details of operation of each unit con- 
tributing to the surplus may be learned by turning to the 
tables to which reference is here made. 

Table III. — The receipts and expenses of the College 
of Liberal Arts are given in detail under appropriate headings 
in this table. The table follows the budget classification, 
but combines in a few totals items which are kept in detail 
in the ledgers. It is exceedingly important that the cost 
of the strictly educational work of the college and the income 
to meet it may be disclosed. Consequently, this table gives 
the educational income and expenses separately, and follows 
them with similar information regarding certain special 
items, which, though they pertain to the college, yet do not 
form a necessary part of its work. By means of this divi- 
sion the direct cost per capita of educating students may be 
ascertained, if in addition to the information given therein 
the number of students in attendance is learned. 

Table IV. — ^Analysis of the educational receipts and 
expenses of the CoUege of Liberal Arts for the last two years 
as to sources, applications, and percentages is given in this 
table. It is very interesting and informing to learn what 
part of the cost is met from each kind of income, and 
what relation the principal items of expense bear to each 
other. Any favorable tendency may thereby be encouraged, 
and any unfavorable one corrected if possible. 

Table V. — This table discloses the result of operation 
of the dormitories on a strictly business basis. Rent which 
includes an amount for depreciation has been charged, as well 
as all other expenses. The item of repairs includes renewals, 



166 COLLEGE AND UNIVERSITY FINANCE 

as well as repairs, of furniture and equipment. The cost 
of building repairs is included in the rent. The college income 
is credited with the amount charged for rent and deprecia- 
tion, and the surplus for the year finally carried to a reserve 
for the benefit of the dormitories. 

Tables VI and VII. — These tables show the outcome 
of the operations of the dining-halls and bookstores, and since 
they are made on the same plan as Table V do not require 
comment. 

Table VIII. — This table gives the receipts and disburse- 
ments of the School of Music. The classification followed 
accords with that used for the College of Liberal Arts. 
Since this school is expected to be self-supporting, all 
legitimate costs have been included, as was the case in the 
other departments conducted on a similar basis. In addition 
to similar charges found in those departments, a charge 
of $800 is made to this school to provide an equipment 
reserve to replace pianos, organs, and other musical equip- 
ment when needed. 

Table IX. — The cost of operating the central power 
plant on a strictly business basis is shown in this table. 
An annual charge of $2,000 has been made and carried to 
equipment reserve to build up a fund for the replacement 
of boilers and machinery when needed. The cost of the 
plant operation has been allocated to the departments using 
its services. To the proportion of cost chargeable to the 
School of Music, dormitories, and dining-haUs has been 
added their proportion of interest on the original cost of the 
plant and its equipment, and a similar sum credited to the 
charge to the College of Liberal Arts. This method obviates 
charging interest on the whole plant and crediting it to 
college income, and increasing the charge for the heat, light, 



TREASURER'S REPORT 167 

water, and power furnished to the College of Liberal Arts 
by its proportion of the interest so charged. The result is 
the same in both cases because under either plan the net 
credit to the college is the proportion of interest charged to 
the other departments. 

Table X. — This table reports in detail the gifts actually- 
paid to the college during the year. They are classified as 
to capital and current, and so arranged that it is not necessary 
to fist them again separately in other portions of the report. 
If the list of gifts received each year is printed annually it 
is possible to obtain with ease the total of gifts up to date. 
It is a good plan to keep a card ledger account with each 
donor and post to it any gifts which he may make. 



Schedule I. — The investments of endowment funds are 
given in this schedule. The kinds owned, their average 
yield as of June 30, the percentage of the total which each 
kind of investment is, the investments belonging to the funds 
which have been consoHdated for purposes of investment, 
those belonging to funds separately invested, and details of 
the investments, with the exception of real estate mortgages, 
may all be found herein. Real estate mortgages are classified 
as to location of property securing them, and grouped as to 
cities and states. The number and amount in each location 
are shown and finally a classification as to the various rates 
of interest received is given. This manner of reporting real 
estate mortgages gives more information than a list of the 
names of persons from whom the mortgages were taken, 
and occupies much less space. 

Schedule II. — This schedule shows the investments 
belonging to annuity funds and is made after the plan 
followed in Schedule I. 



168 COLLEGE AND UNIVERSITY FINANCE 

Schedule III. — The plant of the college is described in 
detail in this schedule. From it one may learn the names 
of the buildings and the purposes for which they are used. 
The type, date of construction, cubical content, and cost to 
date are indicated. From these data one may get a good idea 
of the plant, and find the cost per cubic foot of each building. 
For the sake of comparison with cost the inventory value 
of the buildings, land, and equipment is shown in totals. 

Schedule IV. — This schedule is self-explanatory. 

Schedule V. — In this schedule the endowment funds 
are shown first in totals, later in detail, and classified as to 
objects for which the income is to be used. The amount at 
the beginning of the year, the changes occurring during the 
year, and the amount of the funds at the close of the year 
are all indicated. The funds which are consolidated and 
invested together, and those which are invested separately 
are also shown. From this schedule full information may 
be obtained as to the endowment and the particulars of any 
changes made during the year. 

Schedule VI. — This schedule gives full particulars 
regarding the annuity funds held by the college, and the 
purposes to which they are to be devoted ultimately. The 
rates of annuities paid, the amount of income received, the 
amount invested, the cash uninvested, and the changes 
occurring during the year are Hkewise given. 

Schedule VII. — The building and equipment funds 
which are being held and augmented by interest for future 
use are described in this schedule. The method of presenta- 
tion is similar to that used in previous schedules and needs 
no further elaboration. When the object for which any fund 
was given is accomphshed the accoimts are closed into the 
permanent accounts of property and plant funds and removed 
from this classification. 



TREASURER'S REPORT 169 

Schedule VIII. — Funds for objects of a general nature 
are often given to the college, which, if used diu-ing the year 
in which they were given, would be classified under ''General 
Funds for Designated Purposes" and the cash deposited 
in the general account cash. But if it takes several years 
to carry out the purposes of the gifts it is better to include 
them among "Special Funds for Designated Purposes" and 
carry the cash in the special bank account. 

This plan insures the availability of the cash when 
needed. Thus, in this schedule funds for making loans to 
students, and a gift for lectures on the labor movement, to 
be spread over a period of years, are included. The amoimt 
spent for the lectures is also included among the income 
and expenses of the College of liberal Arts as part of its 
extra-curriculum activities. The charges during the year 
for loans made to students and the income received, together 
with additions to the fimd, are shown, and the balances 
remaining at the close of the year are indicated. 

Schedule IX. — In this schedule is given a list of the 
funds to be used for restricted purposes of a general nature. 
The balance at the beginning of the year, the changes 
occurring during the year, and any balance unexpended at 
the close of the year, are all Hsted in detail. The sources 
of receipts and the amount received from each source are 
given, and the amount expended indicated. The expendi- 
tures are also included among the expenses of the College of 
Liberal Arts, and the sum equal to them taken from the 
income of these funds and included in the College of Liberal 
Arts income. Any balance unexpended is carried forward 
under the classification of this schedule to next year's 
account. By means of this schedule one can see whether 
the terms of restricted gifts are observed, an advantage 
which might not be possible if the simis were included only 



170 COLLEGE AND UNIVERSITY FINANCE 

in the accounts of the College of Liberal Arts of a similar 
nature. 

Schedule X. — The additions made to Reserves during 
the year are listed in this schedule, and the total sums on 
hand on June 30, 1921. 

Schedule XI. — This schedule allocates to each building 
used for educational purposes the cost of maintenance and 
upkeep, classified under headings descriptive of the elements 
of cost, and needs no special explanation. 



CHAPTER X 
COLLEGE ORGANIZATION 

THE CHARTER 

The charter or act of incorporation of an endowed coUege 
has usually been granted by special act of the legislature, or 
has been framed in accordance with the statutes of the state. 
Its original form — ^if a special charter — ^is seldom altered 
because certain exemptions and rights which were granted 
in the early days might be withdrawn if it were reconsidered 
by present-day legislators. 

The charter normally recites the legal name of the body 
corporate (a title which must always be used in signing 
contracts or other legal papers) ; the general and particular 
object of the corporation; the location; the method of 
management; the quahfications and number of trustees, 
their term of office, their powers and duties, and the method 
for election of their successors. It ordinarily states that the 
corporation does not have capital stock and was not organized 
for profit; that it may sue and be sued; that it may acquire, 
hold, invest, sell, and convey both real and personal property, 
whether obtained by gift, grant, bequest, or otherwise; that 
it may serve as trustee in handling gifts and bequests; 
that it may have, use, and alter a seal; that the governing 
body has power to prescribe requirements for admission, 
graduation, and the courses of study; that it may confer 
degrees, diplomas, and honors; that it may employ teachers 
and others under such conditions as it may determine; that 

171 



172 COLLEGE AND UNIVERSITY FINANCE 

it may make by-laws to give effect to the provisions of the 
charter, and may amend, alter, or replace them when neces- 
sary, subject, however, to the constitution and laws of the 
United States and of the state. In brief, the governing 
body is usually vested ''with all the powers necessary or 
convenient to accomplish the object and perform the duties 
prescribed." 

THE BOARD OF TRUSTEES 

From the recital of the powers contained in the charter 
it is evident that supreme authority is vested in the board 
of trustees, but it will be observed later that many of its 
duties are delegated to the executive officers and committees. 
The trustees of an endowed college usually elect their own 
successors, but in the case of some denominational insti- 
tutions their choice may be restricted to persons nomi- 
nated by the denominational conference or convention. 
Occasionally the denominational conference or convention 
elects the trustees. In order to secure continuity of policy 
it is customary so to arrange the term of office and the date 
of expiration that the maximum change in membership tak- 
ing place in any year is clearly a small minority of the board. 
Effective service by a trustee is dependent upon long 
acquaintance with the institution and its needs, so that 
changes in the board should not be made too often. The 
number of trustees varies — ^commonly from fifteen to twenty- 
one in colleges independent of control by religious bodies; to 
thirty-six or more in colleges having connection with denomi- 
national organizations. (The supposititious college herein- 
after described as ''Endowed College" has twenty-one 
trustees.) 



COLLEGE ORGANIZATION 173 

It is worthy of commendation that busy men, burdened 
with responsibihties, willingly devote much time and energy 
to further the cause of higher education, and give material 
assistance for its maintenance and development. Because 
they are busy men, occupied with their own affairs, the 
trustees should give consideration primarily to questions of 
pohcy, and should entrust the execution of poHcies deter- 
mined to committees of the board and to administrative 
officers of the college. In deciding the best policy for the 
conduct of the college they will naturally be guided by the 
advice and experience of the administrative officers. Search- 
ing and careful study should be made by the board of the 
reasons given by the officers in support of their recommen- 
dations, because a critical (but sympathetic) attitude on their 
part toward the reconunendations of the college officials 
will be of benefit to the college and will develop a more careful 
and mature judgment on the part of the officers themselves. 

THE BY-LAWS 

By-laws are designed to give effect to the provisions of 
the charter or the articles of incorporation, to provide for 
committees and officers, and to specify their duties and the 
manner in which they shall be performed. 

In response to numerous requests for a typical set of 
by-laws the following have been prepared, describing suit- 
able methods of procedure and an appropriate division of 
authority and responsibiUty. 

'^Endowed College" is supposed to have about five 
hundred students, approximately Two Milhon Dollars of 
endowment, and a plant costing about Nine Hundred Thou- 
sand Dollars. In a college of this size it is neither desirable 



174 COLLEGE AND UNIVERSITY FINANCE 

nor feasible to have as many administrative officers as in a 
larger college or university. For this reason the checks and 
balances required for correct business management cannot be 
so readily provided. It has seemed best to assume that the 
treasurer of "Endowed College" is a prominent citizen of 
the community, probably a banker, with wide experience 
and intimate acquaintance with financial affairs, but unable 
to devote his whole time to the college, and that he has the 
general oversight and custody of the securities and property 
of the college, while the secretary and business manager is 
the chief business officer, devoting full time to the work 
and filling the two offices. In performing the duties of 
secretary he will attend all meetings of the board and its 
committees, will keep their minutes and become fully con- 
versant with their policies and actions, and as business 
officer will have charge of the business and accounting of 
the institution, directing the details of its business affairs. 
Under the arrangement which is here proposed the college 
obtains as treasurer a man held in high esteem, and as 
secretary and business manager a competent man, occupying 
a positioti of dignity and responsibility and remunerated 
with a suitable salary. 

In drawing checks upon the funds of the college good 
business practice requires the signature of two persons, one 
as maker, the other as countersigner. Where there is only 
one business officer devoting full time to the affairs of the 
college, it is difficult to arrange conveniently to give effect 
to this principle. In the case of "Endowed College" it is 
suggested that the business manager, as chief business 
officer, prepare and sign checks on aU the funds of the college, 
that the treasurer countersign those drawn on endowment 
funds, on funds for special purposes, and on building funds. 



COLLEGE ORGANIZATION 175 

and that the president, or some person authorized by the 
board to sign in his place, countersign checks on the general 
funds. 

STAFF REQUIRED FOR BUSINESS DEPARTMENT OF AN 
ENDOWED COLLEGE OF MODERATE SIZE 

The question may be asked : Is the plan of administration 
here outlined an expensive one to maintain, and out of the 
reach of a college of moderate size ? The plan will be found 
no more expensive than that which many colleges now have, 
and its result cannot but be much more satisfactory. It 
calls for one paid officer in charge of all the business 
affairs of the college. His position is of sufficient impor- 
tance to warrant a respectable salary and to attract a 
man of abihty. He will need a stenographer and a book- 
keeper for his office, both of whom may well be women. At 
the opening of the year, and at rush periods, the help of a 
few student assistants may be required. The engineer in 
charge of the power plant may act as his assistant in caring 
for the physical plant. The increase in income resulting 
from prompt collection of fees, a sUght increase in return 
from endowments due to careful investment, and the savings 
in expense resulting from wise purchasing and economical 
use of equipment, suppUes, and fuel, may more than equal 
the annual cost of the department. Aside from these 
considerations the impression made upon friends and patrons 
of the college by good business management pays for itself 
many times over. 



THE BY-LAWS OF ENDOWED COLLEGE 
COLLEGE CITY, ILLINOIS 

(Revised and Adopted June 22, 1921) 



Section 1. 

Annual 

Meeting 



Section 2. 

Regular 

Meetings 



Section 3. 
Notice of 
Meetings 



Section 4. 

Special 

Meetings 



Section 5. 
Call for 
Special 
Meetings 



Section 6. 
Place of 
Meeting 



AETICLE I. MEETINGS 

The annual meeting of the Board of Trustees 
of Endowed College shall be held at College City, 
Illinois, on the day next preceding the annual 
commencement, at the hour of 10 a.m. 

Regular meetings shall be held on the third 
Tuesday of October, of January, and of April, at 
the hour of 10 a.m. 

Notice of all regular meetings shall be mailed 
to each member of the board by the secretary at 
least ten days prior to the date of such meetings. 

Special meetings shall be called at any time 
by the secretary, upon request of the president 
of the board, or of three members of the board, 
or of the president of the college. 

The call for a special meeting shall state the 
nature of the business to be considered, and shall 
be mailed at least five days before the day on 
which the meeting is to be held. 

All meetings shall be held at the office of the 
board unless otherwise directed by the president 
of the board, or by the Board of Trustees. The 
place of meeting shall be indicated in the notice 
or call for the meeting. 

176 



BY-LAWS OF ENDOWED COLLEGE 



177 



Seven members of the board shall constitute 
a quorum for the transaction of any business 
except the election of officers and the amendment 
of by-laws, when a quorum shall consist of a 
majority of the board. 

General parliamentary rules, as modified by 
rules and regulations of the board, shall be 
observed in conducting the business of the board. 

The following shall be the order of business at 
each meeting of the board, but the rules of order 
may be suspended and any matter considered or 
postponed by action of the board : 

CaU to Order 

I. Roll caU 

II. Consideration of minutes of last regular 
meeting and any special meetings held sub- 
sequently, and their approval or amendment 

III. Election of trustees and officers 

IV. Reports of standing committees 
V. Reports of special committees 

VI. Reports of officers and agents 
VII. Unfinished business 
VIII. New business 
IX. Petitions and communications 



Section 7. 
Quorum 



Section 8. 
Rules of 
Order 



Section 9. 
Order of 
Business 



ARTICLE II. OFFICERS 



At the annual meeting, after the election of Election 
trustees, the board shall proceed to organize by of officers 
electing by ballot the following officers to serve 
for one year, or until their successors shaU have 



178 



COLLEGE AND UNIVERSITY FINANCE 



Section 2. 

Special 

Elections 



Section 3. 
Duties of 
President 



Section 4. 
Duties of 
Vice- 
President 



Section 5. 
Duties of 
Treasurer 



been elected and shall have qualified : a president, 
a vice-president, a treasurer, a secretary, and a 
business manager. The president, vice-president, 
and treasurer shall be chosen from among the 
members of the board. The offices of secretary 
and business manager may be held by one person. 

In the event of a failure for any reason so to 
elect any or all of said ofiicers, or in case any 
vacancy occurs in said offices from any cause, 
then an election may be held at any regular or 
special meeting, a majority of all the trustees 
being present and notice of such election having 
been given in the notice of the call for the meeting. 

The president of the board shall preside at 
the meetings of the board and shall discharge the 
duties which ordinarily pertain to that office. 
He shall sign all diplomas and shall execute, with 
the secretary attesting, contracts and instruments 
authorized or issued by authority of the board 
requiring his signature. 

The vice-president of the board in the absence 
or disability of the president shall perform all the 
duties of the president of the board. In the ab- 
sence or disability of the president and the vice- 
president of the board, the chairman, or the 
acting chairman, of the Committee on Finance 
and Investment shall act as president of the board. 

The treasurer of the college shall be the 
custodian of the funds and securities belonging to 
the college, and shall keep the securities in a 
safety deposit vault to be designated by the board. 
He may, by written appointment to be filed with 
the secretary, designate some person who shall 



BY-LAWS OF ENDOWED COLLEGE 



179 



represent him in obtaining access to the securities 
of the college as herein next provided. The treas- 
urer shall be responsible for all acts of his repre- 
sentative. 

The treasurer shall countersign voucher 
checks on endowment funds, on funds for special 
purposes, and on building funds as prepared and 
signed by the business manager. (See Art. II, 
Sec. 7.) 

He shall file with the secretary a bond for the 
faithful performance of his duties in such sum 
as may be fixed by the board, and if not so 
fixed, then in the sinn of Seventy-five Thousand 
Dollars ($75,000), with some responsible surety 
company approved by the board; the premium 
on said bond to be paid by the college. 

In case of the absence of the treasurer, or of 
his inability to act, or in case the office becomes 
vacant, his duties shaU be performed by the 
chairman or acting chairman of the Committee 
on Finance and Investment. 

Access to the securities of the college shall be 
had by not fewer than two persons jointly in the 
following manner, and never otherwise: 

a) By the treasurer (or his representative) 
jointly with the business manager; 

h) By the treasurer (or his representative) 
jointly with the chairman or acting chairman 
of the Committee on Finance and Invest- 
ment; 

c) By the treasurer (or his representative) 
jointly with the president or acting president of 
the board. 



Surety 
Bond of 
Treasurer 



Access to 
Securities 



180 COLLEGE AND UNIVERSITY FINANCE 

This provision, however, shall not be held to 
exclude the presence of other persons at the same 
time, providing access has been obtained as 
aforesaid, nor shall the provisions of this article 
be held to prevent the Board of Trustees from 
contracting with a responsible trust company to 
act as custodian in holding and keeping safely 
said securities, and to make deliveries on the 
order of any two persons entitled to access to 
said securities under this section. 
Section 6. 'pj^g sccretarv shall perform the usual duties 

Duties of , , ^ j^- 

Secretary pertaining to this office. He shall keep full and 
true minutes of all meetings of the board and the 
meetings of all standing committees of the board, 
and of such special meetings as shall be requested 
of him. He shall be the custodian of all docu- 
ments committed to his care. 

He shall transmit promptly to each trustee a 
copy of the minutes of the meetings of the board 
and of its committees, and he shall notify all per- 
sons concerned of the actions taken by the board 
with respect to appointments, promotions, terms 
of service, and appropriations for their work and 
departments, and of any other matter. 

He shall see that all bonds required by officers 
and employees of the college for the faithful 
performance of their duties are filed in his office. 
The business manager shall furnish the secretary 
a list of all officers and employees who should be 
bonded. He shall have the custody of the 
corporate seal and shall with it attest all docu- 
ments requiring a seal. 



BY-LAWS OF ENDOWED COLLEGE 



181 



The business manager shall be the chief 
business officer of the Board of Trustees, and shall 
be the chief executive head of those departments, 
officers, and employees of the college not attached 
to the instructional staff. He shall see that the 
rules and regulations prescribed by the Board of 
Trustees for the government of the business 
affairs of the college are faithfully observed. He 
shall have the management of the entire college 
plant, and of all property of the college, whether 
real, personal, or mixed. He shall take the initia- 
tive in seeking investments for the funds of the 
college, and shall report promptly thereon to the 
Committee on Finance and Investment. He shall 
be responsible for the economical purchase of all 
supplies and materials bought by the college, and 
shall see that all building and other contracts 
made by the board are faithfully executed. 

The business manager shall collect and receive 
all moneys arising from gifts, bequests, or other- 
wise, for the benefit of the college, and all fees 
and money from any source due to the college or 
to any of its departments. He shall deposit 
promptly all such moneys received to the credit 
of the college in the appropriate bank accounts 
in such state or national banks as may be deter- 
mined by the Board of Trustees. 

He shall keep proper books of accoimt, fully 
setting forth the financial conditions and transac- 
tions of the college, and shall exercise a general 
supervision over all accounts of officers and 
employees of the college which have to do with 



Section 7. 
Duties of 
Business 
Manager 



Management 
of Property 



Receipt 
of Funds 



Supervision 
and Keeping 
of Accounts 



182 



COLLEGE AND UNIVERSITY FINANCE 



Examination 
of Accounts 



Methods of 
Payment 



the receipt or disbursement of funds and securi- 
ties, and he shall obtain true and full reports of 
all such receipts and disbursements from the 
officers and employees aforesaid, who shall keep 
their accounts in such manner and render to him 
such statements as may be from time to time 
required by him, or as may be needed to show 
correctly the financial condition of the college, or 
any of its departments. He shall supply the 
board and the committees and the president of 
the college with such statements as may be 
required of him, or as may be needed to show 
correctly the financial condition of the college or 
any of its departments. 

He shall examine all accounts, claims, and 
demands against the college, and no money shall 
be drawn from its treasury unless the amount 
thereof be adjusted and settled by him and found 
to be within the budget appropriation, or provi- 
sion, therefor. If he shall, upon the examination 
of any account, doubt its correctness or find the 
appropriation or provision insufficient, he shall 
submit the account to the Committee on Finance 
and Investment for its decision. No money shall 
be drawn from the treasury except by checks 
prepared and signed by him as follows: 

a) Voucher checks on the endowment funds 
and on funds for special purposes, and on building 
funds, for purchases and payments authorized by 
the Committee on Finance and Investment or by 
special action of the board; said voucher checks 
to be countersigned by the treasurer. 



BY-LAWS OF ENDOWED COLLEGE 



183 



b) Voucher checks on current funds in pay- 
ment of bills for materials and supplies, provision 
for which has been made by the board or the 
Executive Committee, approved by the deans or 
heads of departments; said voucher checks to be 
coimtersigned by the president of the college or 
some person authorized by the Board of Trustees 
to sign in his place. 

c) Checks on current funds for salaries and 
wages as fixed by the board or the Executive 
Committee, or certified by the directors of depart- 
ments in accordance with budget provision or 
other appropriations; said checks to be counter- 
signed by the president of the college or some 
person authorized by the Board of Trustees to 
sign in his place. 

All voucher checks shall indicate the particular 
account to which the payments are chargeable 
and the person to whom payable. 

The business manager shall give a bond in 
favor of the college for the faithful performance 
of his duties in such sum as may be fixed by the 
board, and if not so fixed, then in the sum of 
Twenty-Five Thousand Dollars ($25,000), with 
some responsible surety company approved by 
the board, the compensation of such surety com- 
pany to be paid by the college. 

He shall see that all officers and employees Surety 

^ "^ Bonds of 

in all departments of the college having custody officers and 
of or responsible for funds and securities shall ^"^p^^^^^^ 
furnish bonds in such amounts as shall be deter- 
mined and fixed by the Committee on Finance 



Surety- 
Bond of 
Business 
Manager 



184 



COLLEGE AND UNIVERSITY FINANCE 



and Investment; and it is also hereby provided 
that all premiums thereon shall be paid by the 
college. 

The business manager shall also perform such 
other duties as the president of the college or 
the Board of Trustees may from time to time 
designate. 

In case of vacancy in the office of business 
manager, or of his absence or inability to act, his 
duties shall be performed by the chairman or 
vice-chairman of the Executive Committee. 



Section 1. 



Standing 
Committees 



AETICLE III. COMMITTEES OF THE BOAED 

There shall be six standing committees of 
the Board of Trustees, namely : 

a) Executive Committee 

b) Committee on Finance and Investment 

c) Committee on Instruction 

d) Committee on Buildings and Grounds 

e) Committee on Audit 
/) Committee on Budget 

Section 2. 'pj^g standing committees, other than the 

Appointment 

of Committees Committee on Budget, shall be appointed by the 
president of the board, with the concurrence of 
the board, at the annual meeting, or as soon 
thereafter as possible, to serve until their succes- 
sors are appointed. In making the appointments 
the president shall designate the chairman and 
vice-chairman of each committee, except for the 
Executive Committee and the Committee on 
Budget. 

Sections. Each Committee appointed as aforesaid shall 

Personnel of . . 

Committees consist of fivo members of the board, and, in 



BY-LAWS OF ENDOWED COLLEGE 



185 



addition, the president of the board and the 
president of the college as members ex ojfficio. 

Record of the actions of each committee 
shall be kept by the secretary of the board, and 
shall be reported in writing to the board at its 
next meeting for approval. A copy of the minutes 
of each committee meeting shall be sent promptly 
to every member of the board. 

Three members of any of the foregoing 
committees shall constitute a quorum. Meetings 
of any committee shall be called by the secretary 
whenever requested to do so by the chairman of 
the committee, by the president of the board, or 
by the president of the college. The Executive 
Committee shall meet regularly on the last 
Friday of each month at 10 a.m. All committee 
meetings shall be held at the office of the board, 
unless otherwise directed by the chairman of 
the conamittee. The place of meeting shall be 
indicated in the notice. 

The Executive Committee shall, when the 
board is not in session, arrange for the execution 
of orders and resolutions not otherwise specifically 
committed or provided for. It may fill vacancies 
in the faculty occurring during a recess of the 
board, and, in accordance with the general policy 
of the board, shall have the care and direction 
of matters pertaining to the welfare of the 
college, and especially shall discharge such duties 
as the board may assign to it from time to time. 
It shaU make formal report of its actions to the 
board at its next regular meeting. The president 
of the board shall be chairman of the Executive 



Section 4. 
Minutes of 
Committees 



Section 5. 
Quorum of 
Committees 



Time and 
Place of 
Meeting 



Section 6. 
Duties of 
Executive 
Committee 



186 



COLLEGE AND UNIVERSITY FINANCE 



Section 7. 
Duties of 
Committee 
on Finance 
and 
Investment 



Classification 
of Funds 



Hypotheca- 
tion of Endow- 
ment Funds 



Committee unless he finds it inconvenient or 
inexpedient for him to act. In that case the 
committee shall elect its own chairman. 

The Committee on Finance and Investment, 
acting in accordance with the general policy and 
under the instructions of the board, shall make or 
cause to be made investments of all college funds 
available for investment. This committee, dur- 
ing the intervals between the meetings of the 
Board of Trustees and of the Executive Com- 
mittee, shall have authority to change the form 
of investments of college funds and to make new 
investments in amounts aggregating, but not ex- 
ceeding. One Hundred Thousand Dollars ($100,000) 
without the previous approval of the board, and 
the committee shall make formal report of all 
such transactions to the board at its meeting next 
following. No investment, purchase, or sale for 
the account of endowment funds of the college, 
nor any contract concerning the same, shall be 
made by the treasurer or the business manager 
without the formal approval of this committee, 
which shall have supervision of the funds of the 
college. 

The funds of the college shall be grouped as 
follows: 

a) Endowment funds 

b) Funds for special purposes 

c) Building funds 

d) Current funds 

The endowment funds shall neither be ex- 
pended nor hypothecated for current expenses, 



BY-LAWS OF ENDOWED COLLEGE 187 

but shall be retained and preserved inviolate. In- 
vestments of endowment funds shall be made as 
heretofore provided by the Committee on Finance 
and Investment. There shall be no restriction 
as to the kinds of investments which may be 
made, except as hereinafter provided, but other 
things being equal, preference shall be given to 
securities issued by the federal and state govern- 
ments, and to obligations issued by cities having 
over twenty-five thousand inhabitants; to real 
estate mortgages on improved property, prefer- 
ably in the state of Illinois and adjacent states, 
but in no case shall the amount loaned on mort- 
gages exceed 50 per cent of a fair valuation. 

No loan shall be made to any trustee, officer, Certain 

,. . Loans 

or employee oi the college, nor to any religious, prohibited 
fraternal, or charitable organization. 

Fimds for special purposes shall consist of all 
gifts, grants, donations, and bequests for special 
purposes, whose principal and income may be 
used, and shall be expended or invested in 
accordance with the terms of the gift. 

Building fimds shall consist of all gifts, grants, 
donations, and bequests for the erection and 
equipment of buildings, and of other moneys 
and properties appropriated or assigned by the 
Board of Trustees for that purpose. 

The current funds shaU consist of income on 
endowments, tuition receipts and other fees, 
gifts, grants, or bequests for current purposes, 
receipts from business and commercial operations 
of the college, and all other receipts for current use. 



188 



COLLEGE AND UNIVERSITY FINANCE 



Separation 
of Funds 



Section 8. 
Duties of 
Committee 
on Budget 



Endowment funds, funds for special purposes, 
and building funds, shall not be deposited with 
or combined in any way with the current funds 
of the college. 

The Committee on Budget shall consist of the 
chairman of the four committees first above 
mentioned, together with the president of the 
college, the president of the board, and the 
secretary and business manager, and shall have 
supervision over the bookkeeping and the financial 
records of the college, and shall submit to the 
board at the regular April meeting for its consider- 
ation and approval a budget for the year com- 
mencing on the first day of the following July. 
The budget submitted shall include an itemized 
statement of the probable income of the college 
available for its expenses, and shall indicate the 
sources from which the income is to be derived. 
It shall also give an itemized Hst of the estimated 
expenses for the year, showing in detail the salaries 
to be paid and the persons to whom payable, and 
separating other current expenses and expenses 
for books and equipment by departments. The 
president of the board shall be chairman of this 
committee. 

The budget, when approved by the board, 
shall be the authority for incurring expenditures 
for the departments included therein. It shall 
be the duty of the president of the college 
and the business manager, acting as a commit- 
tee on expenditures, to make distribution of 
such budget appropriations as are general by 



BY-LAWS OF ENDOWED COLLEGE 



189 



authorizing expenditures within the Hmits of 
such appropriations, subject to the following 
procedure : 

Requisitions upon authorized budget appro- 
priations shall be made by the administrative 
officers of the college and heads of departments 
for materials, supphes, services, and expenses 
before any expenditure is incurrred, and shall 
be sent to the president and the business 
manager for approval. No requisition shall be 
approved which exceeds the amount of the appro- 
priation available without reference to the 
Committee on Finance and Investment. The 
business manager shall give effect to the approved 
requisitions either directly or indirectly. 

The Committee on Instruction shall consider 
all changes in the instructional staff proposed 
by the president of the college, and shall make 
recoromendations to the Board of Trustees 
regarding the members of the instructional staff, 
specifying the terms of their employment, in 
accordance with the approved budget. It shall 
also be the duty of this committee to examine 
the system of instruction, educational manage- 
ment, rules, disciphne, and all other matters 
pertaining to the educational problems of the 
college, and to report and make recommendations 
thereon to the board. 

The Committee on Buildings and Grounds 
shall exercise supervision over the care and control 
of aU buildings, grounds, and equipment of 
the college. It shall once a year, or oftener 



Section 9. 
Duties of 
Committee 
on 
Instruction 



Section 10. 
Duties of 
Committee 
on Buildings 
and Grounds 



190 



COLLEGE AND UNIVERSITY FINANCE 



Section 11. 
Duties of 
Committee 
on Audit 



if necessary, inspect said buildings, grounds, and 
equipment, and report to the trustees the condi- 
tion of the same, recommending such expenditures 
as in its judgment should be made to keep them 
in good condition. Report of its inspection shall 
be made at the January meeting of the board in 
order that its recommendations may be consid- 
ered by the committee preparing the annual 
budget. It shall be its duty to see that the 
buildings and property of the college are ade- 
quately insured. 

The committee shall investigate and deter- 
mine the need for new buildings, and shall report 
to the board, recommending suitable sites. It 
shall be responsible for the preparation of plans 
and specifications of such new buildings as the 
board may determine upon; it shall call for bids, 
and shall recommend to the board for approval 
the contractor, or contractors, who, in its opinion, 
shall be awarded the contract for any construction 
authorized. 

The Committee on Audit shall consist of five 
members of the board, not including the treasurer 
and members of the Committee on Finance and 
Investment, and shall arrange for and supervise 
the annual audit of the books and securities of 
the college by a firm of public accountants. 
A written report by said committee of its exami- 
nation shall be made at the regular meeting of 
the board in October. 



BY-LAWS OF ENDOWED COLLEGE 



191 



ARTICLE IV. PRESIDENT OF THE COLLEGE 

The president of the college shall be a member 
of the Board of Trustees ex officio, and shall be 
the head of all educational departments of the 
college, exercising such supervision and direction 
as will promote their efficiency. He shall pre- 
side at the meetings of the faculty and shall be 
the official medium of communication between 
the faculty and the Board of Trustees, and 
between the students and the Board of Trus- 
tees. 

He shall recommend to the board through the 
Committee on Instruction all promotions and 
appointments for the faculty. 

He shall be responsible for the discipline of 
the college and for carrying out all measures 
officially agreed upon by the faculty concerning 
matters committed to them by the board, and for 
executing such measures concerning the internal 
administration of the college as the Board of 
Trustees may enact. 

He shall make an annual report to the Board 
of Trustees of the work and condition of the 
college, and from time to time shall give to the 
board reports upon the condition of the college, 
and shall present for their consideration such 
measures as he shall deem necessary or expedient 
for its welfare. 

In case of vacancy in the office of the president 
of the college, or of the absence of the president. 



Section 1. 
Duties of 
President 
of College 



Section 2. 
Annual 
Report of 
President 



Section 3. 

Acting 

President 



192 COLLEGE AND UNIVERSITY FINANCE 

or of his inability to serve, the board may appoint 
an acting president of the college. 



Section 1. 



Section 2. 



Section 3. 



AETICLE V. THE FACULTY 

The faculty shall consist of the president of 
the college, the deans of the college, and the 
officers of instruction, classified as follows: the 
professor, the associate professor, the assistant 
professor, the instructor, and the assistant. Only 
persons of the rank of instructor and upwards 
shall be entitled to vote at meetings of the faculty. 
Assistants who are appointed for at least one year 
may attend the meetings and take part in the 
deliberations, but shall not vote. 

The faculty shall meet monthly during the 
college sessions, and shall appoint a secretary who 
shall keep a record of their proceedings. They 
shall make such rules of procedure and provide 
for such committees as may be required. 

The faculty shall prescribe, subject to ap- 
proval by the Board of Trustees, requirements for 
admission, courses of study, conditions of gradu- 
ation, the nature of degrees to be conferred, rules 
and methods for the conduct of the educational 
work of the college, and shall recommend to the 
board candidates for degrees, persons to receive 
the award of fellowships, scholarships, and prizes, 
and candidates for honorary degrees, and shall 
investigate all cases of misconduct of students, 
or violations of rules of the college by students, 
and through the president and deans shall 
administer such discipHne as the circumstances 



BY-LAWS OF ENDOWED COLLEGE 193 

require. They shall prescribe rules for the regula- 
tion of student publications, athletics, inter- 
collegiate games, musical, dramatic, and literary- 
clubs, and other student affairs. 

ARTICLE VI. AMENDMENTS 

These by-laws may be amended or repealed 
at any regular meeting of the board by a vote of 
two-thirds of all the members present, provided 
a majority of the trustees shall be present and 
participating in the meeting, previous notice of 
the nature of any proposed amendment having 
been given at least one regular meeting before 
action thereon shall be taken. 

ARTICLE VII. FORMER BY-LAWS 

All former by-laws are hereby repealed. 



APPENDIX 

WISCONSIN TRUST LAWS AS TO INVESTMENTS FOR 

TRUST FUNDS 

CHAPTER 96 

Trust funds; investment; securities; bonds. Section 21006. 
1. Every executor, guardian, or trustee, except where it is other- 
wise expressly directed by the will or instrument of trust, if any, 
may invest trust funds in bonds of the United States, and also in 
the bonds of any state of the United States, except the states of 
Nevada and Wyoming, and except also the present territories of 
the United States (and such territories shall continue to be excepted 
after admission to statehood); in the bonds which are a direct 
obHgation of any city, town, village, county, or school district in 
the state of Wisconsin, and also in the bonds which are a direct 
obUgation of any city in any other of the states included herein, 
having a population of not less than twenty-five thousand and also 
in the bonds which are a direct obligation of any county in any 
other of the states included herein having a population of not less 
than thirty-five thousand, provided that such city or county shall 
not have defaulted in the payment of any of its bonded indebted- 
ness during ten years immediately preceding such investment, and 
provided further that the existing indebtedness of any such city or 
coimty be restricted under the laws of the state wherein it may be 
situated, to a sum in the aggregate not exceeding five per centum on 
the value of the taxable property therein, to be ascertained by the 
last assessment for state and county taxes previous to the incurring 
of such indebtedness; in the paid-up stock of any building and 
loan association organized under the laws of this state; in the bonds 
of the federal or joint stock land banks authorized by the federal 
farm loan act approved July 17, 1916; in the mortgage bonds of 
any steam railway or railroad corporation in the United States 
owning and operating not less than five hundred miles of track, 
which has paid dividends upon its entire capital stock for ten years 

194 



APPENDIX 195 

immediately preceding such investment; in first mortgage bonds of 
any public utility corporation as defined in section 1797m, 1 of 
the statutes, or any street railway corporation, operating in cities 
in this state with a population of ten thousand or over, the gross 
earnings of which from operation of the property covered by the 
mortgage, for each of five fiscal years next preceding such invest- 
ment, annually amount to at least six times the annual interest 
charges on all of its first mortgage indebtedness, and the net earn- 
ings of which from operation of the property covered by the 
mortgage, for each of five fiscal years next preceding such invest- 
ment, above operating expenses including depreciation, maintenance 
and taxes, annually amount to not less than ten thousand dollars, 
and are at least two and one-half times the annual interest charges 
on all of its first mortgage indebtedness, provided that such 
mortgage on such pubhc utiUty or street railway is a closed 
mortgage, and shall have been outstanding at least five years, and 
does not exceed in amount one-half of the value of the physical 
property covered by such mortgage, and provided further that such 
pubhc utiHty or street railway bonds shall mature not later than 
ten years from the date of investment of such trust funds therein 
under this section ; in obhgations secured, whether alone, or in com- 
bination with other obhgations on a parity therewith, by first real 
estate mortgages, or trust deeds, on improved farm property or 
improved urban property (other than pubhc utihty or street rail- 
way property except as herein provided) in this state and adjoining 
states, the amount of which mortgages, or trust deeds, does not 
exceed one-half of the actual value of the property covered thereby; 
and in promissory notes, which are amply secured by pledge of any 
of the bonds, real estate mortgages, or securities in which invest- 
ment is hereinbefore authorized. 

2. However, the proportion of any one trust fund that may be 
invested by an executor, guardian, or trustee in notes, bonds, or 
other securities in which investment is authorized by this section, 
the value of which is dependent upon the same persons, firms, 
associations of pubhc or private corporations, shall be subject to 
limitations as follows: 

a) When the trust fund exceeds two thousand but does not 
exceed five thousand dollars, fifty per cent thereof, unless the 



196 COLLEGE AND UNIVERSITY FINANCE 

investment is in obligations secured by a first real estate mort- 
gage; 

b) When it exceeds five thousand but does not exceed twenty 
thousand dollars, forty per cent thereof, unless the investment is in 
obhgations secured by a first real estate mortgage the amount of 
which does not exceed six thousand dollars; 

c) When it exceeds twenty thousand but does not exceed fifty 
thousand dollars, thirty per cent thereof; 

d) When it exceeds fifty thousand dollars, twenty per cent 
thereof. 

3. Nothing herein contained shall be construed to affect the 
power or jurisdiction of any court of the state of Wisconsin in 
respect to trusts and trustees, nor to affect any powers or author- 
ity as to investments conferred by will or other instrument of 
trust. 

4. Nothing in this act contained shall affect any investment 
made prior to the enactment hereof or affect any rights or interests 
established, accrued, or created thereunder or affect any suit or 
action pending when this act becomes effective. {1903 c. 317 s. 
1, 2; 1905 c. 284 s. 1, 2; Supl 1906 s. 2100b; 1907 c. 118; 1909 c. 
462; 1915 c. 536; 1915 c. 635 s. 3; 1917 c. 158; 1919 c. 228, 469; 
1919 c. 630 s. 2.) 

CHAPTER 185 

Trust funds; person holding prohibited from dealing in margins. 
Section 4539m. Any person engaged in the business of receiving 
deposits of money for safe-keeping, any officer or employee of any 
bank, banking company, or trust company, any executor, adminis- 
trator, guardian, trustee, or receiver, or any other person holding 
property or money in any manner in a trust capacity, who shall 
buy, sell, deal, or traffic in any goods, stocks, grains, or other 
property or article of commercial barter by making or requiring 
any deposit, payment, or pledge of any margin or of any money 
or property to cover future fluctuation in the price of such 
goods, stocks, grains, or other property so bought, sold, dealt, or 
trafficked in, shall be punished by imprisonment in the state prison 
not more than ten years, nor less than one year. {1909 c. 347.) 



APPENDIX 197 

CHAPTER V, BY-LAWS OF REGENTS (UNIVERSITY OF 

WISCONSIN) 

TRUST FUNDS 

Section 1. The State Treasurer shall open two special 
accounts of the University, the first of which shall be called "The 
University Trust Funds"; and the second, "The University Trust 
Funds Income." All moneys received on account of the principal 
of any trust fund shall be credited to the account designated "The 
University Trust Funds," and all moneys which shall be invested 
from or on account of the said funds, or otherwise lawfully disbursed 
from the principal thereof, shall be debited to the said account, so 
that the balance thereof on the books of the State Treasurer shall 
at all times disclose the actual cash on hand belonging to the princi- 
pal of said funds. There shall henceforth be credited to the account 
designated "The University Trust Funds Income," as the same 
shaU be received by the State Treasurer, all interest, dividends, or 
other income produced in any form by or from any securities or 
investments of the said "University Trust Funds." When loans 
or investments shall be made as hereinbefore provided, a certificate 
of the amount, and of the particulars thereof, shall be made by the 
Committee on Trust Funds to the Secretary of State, who shall 
issue his warrant on the State Treasurer therefor, mentioning the 
same as a disbursement from "The University Trust Funds"; and 
there shall at the same time be deUvered to the State Treasurer, for 
his custody as provided by law, all securities and papers relating 
thereto taken for such loan or investment. When any loan shall 
be paid, or the principal of any investment reaUzed or reimbursed 
in full, the State Treasurer shall at once certify the fact, with proper 
description of the security discharged, to the Secretary of the Board, 
who is authorized thereupon to execute on behalf of the Regents of 
the University any proper satisfaction, discharge, or acquittance 
which may be necessary to release any security upon the public 
records or otherwise; and to make any assignment, transfer, or 
reconveyance which shall be requisite or convenient for that purpose 
on the part of the Regents of the University of Wisconsin; and the 
Secretary is authorized thereafter to affix thereto, when necessary, 



198 COLLEGE AND UNIVERSITY FINANCE 

the corporate seal of the University as the act of the Regents, and 
shall report thereupon immediately to the Chairman of the Com- 
mittee on Trust Funds. 

Whenever the Regents of the University shall receive by gift, 
bequest, or other donation any income-producing fund they shall 
certify and pay over the amount thereof to the State Treasurer 
who shall credit the same to the principal of the account of "The 
University Trust Funds" and the same shall become a part of the 
principal of said account and all income derived therefrom shall be 
likewise credited to "The University Trust Funds Income"; and 
at the time of so certifying a duplicate thereof shall be sent to the 
Secretary of State, in order that he may make the proper entries 
upon his accounts. At the same time the Secretary of the Board 
shall open proper accounts on the books of the University, as in 
cases before provided for. 

At the close of the 30th day of June in each year, the State 
Treasurer shall make a statement showing the total amount received 
by him and credited to the account of "The University Trust Funds 
Income" during the fiscal year ending on that date, with the par- 
ticulars thereof in respect to dates, amounts, and respective secu- 
rities or investments from which the same was derived, and shall 
transmit the same to the Secretary of the Regents, who shall 
thereupon make the proper entries as hereinafter directed. The 
State Treasurer shall likewise at the same time make a separate 
account showing the balance on hand at the beginning of the fiscal 
year in the account of "The University Trust Funds," the amount 
received during the year to the credit of such account and the 
amount debited thereto, with the particulars in either case of dates, 
amounts, and the respective sources from which receipts were 
derived or the purposes for which disbursements were made; and 
shall also furnish at the same time a fist of the securities and invest- 
ments in his hands with the balance of the principal thereof 
remaining. 

Section 2. The Secretary of the Board shall keep an account 
entitled "The State Treasurer's University Trust Funds," and an 
account entitled "The State Treasurer's University Trust Funds 
Income," both of which shall be cash accounts showing the true 



APPENDIX 199 

state of the moneys remaining in the hands of the Treasurer on 
accomit of the Trust Funds and all the moneys received as income 
therefrom; and shall be entirely separate and apart from the 
general account of the State Treasurer with the University for 
receipts and disbursements on account of the University's general 
income. The Secretary of the Board shall also keep an account 
designated as "The Trust Funds Investments/' to which shall be 
charged the principal sums invested on account of the loan of the 
trust funds, or other investments thereof, for income and to which 
shall be credited the payments received on account of the principal 
thereof from time to time. Whenever any sums which have been 
invested shall be repaid on account of principal, the amount thereof 
will be debited to the State Treasurer's "University Trust Funds" 
and credited to the account of "Trust Funds Investments," so 
specifjdng particulars that the latter account shall always show the 
several investments and the respective amounts of each thereof. 
Whenever receipts are made on accoimt of the principal of any of 
the trust funds therein by reahzation of assets not previously 
entered in money account, or by further donations, the amount 
thereof shall be charged to "The State Treasurer's University Trust 
Funds" and credited to the proper trust fund account. Any dis- 
bursements, or loss, on account of the principal of any of said trust 
funds shall be credited to the State Treasurer's account and debited 
to the proper trust fund. If such loss shall consist in the failure to 
collect any investment, the amount thereof shall be apportioned 
to and debited to the several trust funds in accordance with the 
relation of the principal of each to the aggregate of the whole, as 
hereinafter provided for apportionment of income, except in such 
cases as the same shall be taken from the income and charged to 
"The University Trust Funds Income" by order of the Board. 

Upon the receipt of the State Treasurer's statement made at 
the close of the 30th day of June, of each year, the Secretary shall 
charge to "The State Treasurer's University Trust Funds Income" 
the net amount of annual income derived from all the investments 
of the trust funds, and shall at the same time apportion and credit 
to the several income accounts of the several trust funds such share 
of the total net income as the amount of principal of each of said 



200 COLLEGE AND UNIVERSITY FINANCE 

trust funds, as shown by the balance thereof on the first of the 
fiscal year then closed, shall bear to the aggregate of the principal 
of all the trust funds on that date, due computation being entered 
on the journal. Pajmaents made out of the income of the several 
funds shall then be debited to such respective fund income credited 
upon warrant drawn, to the "State Treasurer's University Trust 
Funds Income," so that the balance standing to the debit of the 
latter account will always be equal to the aggregate of the balances 
standing to the credit of the several trust funds income accounts, 
and the balance standing to the debit of ''The State Treasurer's 
University Trust Funds" and to the debit of "The State Treasurer's 
University Trust Funds Income" will always show the balance of 
moneys in his hands belonging to the University's Trust Funds, and 
the produce thereof, and thus be kept distinct and separate from 
the general accounts of the University. 

Section 3. Payments from the income of each of the several 
trust funds mentioned in section 1, except the Adams Fellowship 
Fund, shall be made annually in accordance with the law governing 
the respective fund as hereinafter provided; but no payment shall 
be made until the income shall have been reahzed and, upon the 
statement of the State Treasurer, credited to the proper income 
account. Such part of the income derived on account of the 
Charles K. and Mary M. Adams Fellowship Fund, as required by 
the wills by which said fund was bequeathed, shall be immediately 
transferred to the capital of said fund, and for that purpose immedi- 
ately upon the receipt thereof the proper amount shall be certified 
to the Secretary of State who shall draw his warrant for the transfer 
thereof from "The University Trust Funds Income Account" to 
"The University Trust Funds" and proper entries shall be made 
by the Secretary upon the accounts aforesaid on the books of the 
University to show the same by crediting the proportionate share 
of income accruing to that fund to the capital of said funds by 
debiting the "State Treasurer's University Trust Funds" with the 
amount thereof. 

Section 4. All loans and investments of moneys belonging to 
the trust funds shall be made by the Committee on Trust Funds 



APPENDIX 201 

from time to time as moneys may be in the hands of the State 
Treasm-er therefor, and the same shall be certified to the Secretary 
of State in the manner required for the certification of accounts so 
that the proper warrant may be drawn therefor upon the Treasurer. 
For this purpose, the Committee on Trust Funds may make such 
certification at any convenient time and obtain the money when 
necessary and they shall promptly place in the custody of the State 
Treasurer all securities, abstracts and other papers received for 
every loan or investment. Every such transaction shall be 
entered in the recorded minutes of the Committee on Trust 
Funds and reported at the next following meeting of the Board 
of Regents. 

All mortgages taken to secure loans, and the transfer of all 
collateral securities for loans, shall be made to ''The Regents of 
The University of Wisconsin." The Committee on Trust Funds 
is also authorized, at any time when in their discretion it shall be 
to the best interests of the trust funds, to sell to any purchaser, 
upon such terms as they shall deem fit, any properties, whether 
real estate or personal, belonging to any of the trust funds of the 
University; and also to sell any securities held by investment of 
the trust funds, or any part thereof; and also, to compound and 
settle any loans in which any of the trust funds are invested, or 
any debt due on account of the said trust funds; and in any and 
every such case, they may, by resolution entered on their minutes, 
require and authorize the President and Secretary of the Board to 
execute and deliver a proper conveyance, transfer, assignment, 
release, and satisfaction, or other instrument requisite to give full 
effect to their action. 

Section 5. The provisions of this by-law relate only to the 
trust funds of the University created for production of income and 
not to gifts, in any form, where it is directed or in any way provided 
that the principal of the gift shall be expended or bestowed either 
during the current year or within any short period thereafter. All 
such gifts or donations in any form, the principal of which is to 
be expended shall be deposited with the current receipts and 
administered by the Committee on Trust Funds. 



202 COLLEGE AND UNIVERSITY FINANCE 

TRUST FUNDS AND THEIR MANAGEMENT 

(From chapter 17) 

University Fund. Section 248. All moneys paid into the 
treasury on account of the capital of the University Fund shall be 
and remain a separate and perpetual fund as required by the con- 
stitution; and the interest derived therefrom and from unpaid 
balances of purchase money on sale of University lands and all 
other revenues derived from the University lands shall constitute 
the University Fund income. 

Agricultural College Fund. Section 249. 1. All moneys paid 
into the treasury on account of the sales of Agricultural College 
lands shall be and remain a separate and perpetual fund, the capital 
of which shall continue forever undiminished, to be called the Agri- 
cultural College Fund; and the interest derived therefrom and 
from unpaid balances of purchase money on sales of such lands and 
all other revenues derived from such lands shall constitute the Agri- 
cultural College Fund income. If any portion of such fund shall 
by any action or contingency be diminished or lost, the Secretary 
of State shall add to the next state tax to be levied thereafter a 
sum sufficient to replace the same, to be, when collected, credited 
to said fund. 

2. If for any year the income from the Agricultural College 
Fund is less than five per centum on the principal, the Regents of the 
University are authorized and required to transfer from the Uni- 
versity Fund income to the Agricultural College Fund income an 
amount necessary to meet the difference between the interest 
actually received and the amount which would have been yielded 
had the income been at the rate of five per centum. 

In what made. Section 258. 1. The said commissioners of 
the public lands shall, in their discretion, invest the moneys belong- 
ing to the School Fund, the University Fund, the Agricultural 
College Fund, and the Normal School Fund, from time to time as 
such moneys may be paid into the treasury, keeping separate the 
investments of each fund, in the following-named stocks and loans, 
but in no other manner, to wit : 

1) In the purchase of the bonds of this state, to be replaced by 
certificates of indebtedness as hereinafter provided. 



APPENDIX 203 

2) In loans to school districts in the state, or to the school 
directors of any town therein in which the township system of 
schools exists, as hereinafter provided, for the purpose of erecting 
school buildings or refunding their indebtedness, but for no other 
purpose. 

3) In approved mortgages on agricultural lands as provided in 
section 258m of the statutes. 

3a) In county bonds issued under the authority conferred by 
section 697, 60 of the statutes. 

4) In the bonds of the United States, Maine, New Hampshire, 
Vermont, Massachusetts, Rhode Island, Connecticut, New York, 
Ohio, Michigan, Illinois, and Iowa, and in the bonds of cities, 
villages, towns, and counties of this state issued pursuant to law 
since the adoption of the amendment to section 3 of article XI of 
the constitution of this state; all such bonds to be deposited with 
the State Treasurer. 

5) In loans to towns, villages, cities, counties, and boards of 
education, duly incorporated as such, of any city within this state, 
as hereinafter provided; and every such town, village, city, county, 
and board of education, is empowered to borrow of said com- 
missioners, from said funds or either of them, such sum or sums of 
money, for such time and upon such conditions as may be agreed 
upon between said commissioners and the town, village, city, 
county, or board of education applying for a loan, subject, howe\^er, 
to the limitations, restrictions, and conditions hereinafter set forth. 

2. The preference in investing the trust funds shall be given 
to the loans provided for in subdivisions (2), (3) and {3a) of sub- 
section 1 in the order named. 



INDEX 



INDEX 



A 

Accountant, certified public 

Audit by, 53 

Certificate of, 127 
Accounting 

For auxiliary departments, 89 

For bookstore, 90 

For buildings in course of con- 
struction, 64 

For current operations, 66 

For dining-halls, 90 

For dormitories, 90 

For funds for special purposes, 
61 

For physical plant, 55, 63 

For sundry receipts and dis- 
bursements, 91 

For trust funds, 58 

System for endowed institu- 
tions, 6, 58 

Accounts 

Cash book, 96 
Classification of, 91 
Closing, 92 
Journal, 96 
Ledger, 59, 62, 92, 97 
Loose-leaf and bound book, 101 
Student, 99 

Supervision and keeping of, by 
business manager, 181 

Administrative ofiicers, reports of, 

41 
Alumni organizations, 17 
Amendments to By-Laws, 193 
Amherst College, 5 

Amortization 
Definition of, 73 
Of premium, 71 

Annual Report of Treasurer, 119 

Annuities, Schedule VI, 155 



Annuity 

Funds subject to, 50 
Investments, report of, 125 
Investments, Schedule II, 148 

Association of Colleges and Sec- 
ondary Schools of the South- 
em States, 15 

Audit 

Annual, 53 
Committee on, 190 

Auditor, Certificate of, 127 

Auxihary departments 
Accounting for, 89 
Disbursements for, 21 
Report of operation, 124 

B 

Balance sheet 
Arrangement of, 107 
Table I, 128 

Bond, surety 
Business manager, 183 
Officers and employees, 183 
Treasurer, 179 

Bookkeeping, double entry system 

of, 96 
Books of account needed, 96 

Bookstore 
Accounting for, 90 
Disbursements for, 22 
Receipts from, 10 
Table VII, 138 

Bound book records, 101 

Brown University, 5 

Budget 
Accounts, 83 
Approval of, 83 
Classification of expenses, 75 
Classification of income, 68 



207 



208 



INDEX 



Classification of recommenda- 
tions, 78 

Closing of, 88 

Committee on, 83, 188 

Comparison of estimated in- 
come and expenditures, 81 

Comparison with income re- 
ceived previously, 75 

Control, 67, 83, 88 

Expenditures, 20 

Methods of estimating income, 
70 

Principles of making, 88 

Revision, 85 

Surplus, 87 

System, 48, 67 

Budget — appropriations 
Classification of, 75 
For administration and general 

expense, 79 
For care and maintenance of 

buildings, 79 
For instruction, 78 
For special purposes, 80 
Summary (tabulated), 81 

Budget — estimates of income 
From endowment investments, 

70 
From gifts, 73 
From miscellaneous sources, 

74,80 
From student fees, 70 
Provision for contingent fund, 

83 
Summary (tabulated), 80 

Buildings 
Accounting for, in course of 

construction, 64 
Additions to, 125 

Buildings and equipment 
Funds, Schedule VII, 157 
Funds, Temporary Investment 
of, Schedule IV, 151 

Buildings and Grounds, Com- 
mittee on, 189 

Buildings, grounds, and equip- 
ment 
Schedule III, 149 



Bulletin, Commissioner of Educa- 
tion, 1 

Bureau of Education, 11, 14 

Business manager 

Duties of, 181 

Endowed College, 174 

Surety bond of, 183 

By-Laws, 173 
Endowed College, 176 
Regents of University of Wis- 
consin (Appendix), 197 

C 

Capital expenditures, 18, 19 

Card system, 99 

Carleton College, 5 

Cash book, receipt, 96 

Cash, record of, 63 

Certificate of Public Accountant, 

127 
Charter, 171 

College of Liberal Arts 

Analysis of Income and Ex- 
pense, Table IV, 135 

Expense, Table III, 133 

Income, Table III, 131 

Physical Plant, Operation and 
Maintenance of, Schedule XI, 
163 

Summary, Table III, 134 

Commissioner of Education 

Bulletin of, 1 

Publications of, 3 
Committee 

Executive, 185 

On Audit, 190 

On Budget, 83, 188 

On Buildings and Grounds, 189 

On Finance and Investment, 186 

On Instruction, 189 

Committees of Board 
Appointment of, 184 
Minutes of, 185 
Personnel of, 184 
Quorum, 185 
Standing, 184 
Time and place of meeting, 185 



INDEX 



209 



Contingent fund, reserve for, 83 

Cornell University, 4 

Current operations 
Accounting for, 66 
Bookstore, 125 
College of Liberal Arts, 123 
Dining-halls, 124 
Dormitories, 124 
In balance sheet, 110 
Receipts and expenditures of 

(tabulated), 120 
Result of, 119 

Cy Pres, doctrine of (note), 28 

D 

Deficits, 47 

Dining-halls 
Accounting for, 90 
Current operations of, 124 
Disbursements for, 22 
Purchasing for, 95 
Receipts from, 10 
Table VI, 137 

Disbursements 

Classification of expenses of 
operation, 19 

For auxiUary departments, 21 

For bookstores, 22 

For current operations, 18 

For dining-halls, 22 

For dormitories, 22 

For land, buildings, and equip- 
ment, 18 

Incurred in raising funds, 22 

Dormitories 
Accounting for, 90 
Disbursements for, 22 
Investment of endowment in, 

44 
Receipts from, 10 
Result of operation of, 124 
Table V, 136 



E 



Election 
Of officers, 177 
Special, 178 



Endowed College 
By-Laws of, 176 
Organization of, 173 
Staff required for, 175 

Endowment 

Accounting for, 60 

Budget estimate of income 
from, 70 

Definition, 24 

For chairs, 28 

Funds, Schedule V, 152 

Gifts to, 15, 29 

Hypothecation of, 46, 186 

Improper use of term, 24 

Income on, 10, 14 

Increase in, 3 

Insidious use of, for current 
purposes, 49 

Investment of, 32, 62 

Investment of, Schedule I, 144 

Loans of, prohibited, 42, 187 

Preservation of principal, 32 

Record of gifts for, 60 

Restricted, 27 

Source of, 15, 26 

Source of income, 1 

Subject to annuity, 50 

Treatment of pledges and sub- 
subscriptions to, 51 

Trustees responsible for invest- 
ment of, 39, 51 

Undesirable investments of, 43 

Unrestricted, 27 

Value placed on gifts to, 29 

Equipment 

Building, 19 

Scientific, 19 
Executive Committee, 185 

F 

Faculty, by-law pertaining to, 
192 

Fees 
Advance payment of, 13 
Breakage, damage and loss, 10, 

12 
Budget estimate of income 

from, 70 
Graduation, 12 



210 



INDEX 



Incidental, 10 

Laboratory materials and sup- 
plies, 10, 12 

Library, 10, 12 

Matriculation, 12 

Proportion of, to cost of educa- 
tion, 10 

Source of income, 1 

Tuition, 10 

Finance and Investment, Com- 
mittee on, 186 
Fines, 13 
Floating debt, 47 

Funds 

Accounting for special, 61 

General, for Designated Pur- 
poses, Schedule IX, 159 

Invested separately or as a 
whole, 37 

Special, for Designated Pur- 
poses, Schedule VIII, 158 

Subject to annuity, 50 

G 

General Education Board, 4 
Gifts 

Budget estimates of income 
from, 73 

Classification of, 15 

For endowment, 60 

From John D. Rockefeller, 4 

Increase, in for endowment, 3 

Kinds of, 16 

Methods of obtaining, 15 

Paid in, Table X, 141 

Receipts from, 10, 15 

Report of, 112, 126 

Source of income, 1, 15 

Value placed on, 29 

Graphs 

Showing distribution of income, 

55 
Statistical, 104 

Grinnell College, 5 

H 

Harvard College, 2, 3 
Harvard University, 4, 5 



Heat, Light, Power, and Water, 
Table IX, 140 

Hypothecation of endowment, 
46, 186 

I 

Income 

Budget classification of, 68 
Budget estimates of, 70 
Comparison of, 75 
From endowment, 14 
From gifts, 15 
From student fees, 10 
Source of, 1 

Indiana State Teachers' Training 
Board, 14 

Instruction, disbm-sements for, 21 

Investments 

Accounting for, 35, 58 

Committee on, 186 

Diversification of, 34 

Funds for special purposes, 62 

Hypothecation of endowment, 
46 

Principles of making, 32 
Procedure in making, 37 

Suitable kinds of, 32 

Trustees responsible for mak- 
ing, 39, 51 

Undesirable, 43 



Johns Hopkins Hospital, 34 
Johns Hopkins University, 34 



Land, buildings, and equipment, 
disbursements for, 18, 19 

Ledger accounts, balancing and 
closing, 92 

Loans prohibited, 42, 187 

Loose-leaf records, 101 

M 

Meetings 
Annual, 176 
Call for special, 176 
Notice of, 176 



INDEX 



211 



Order of business, 177 
Place of, 176 
Quorum, 177 
Regular, 176 
Rules of order, 177 
Special, 176 

N 

North Central Association of 
Schools and CoUeges, 14 

O 

Ofl&cers 

Election of, 177 

Surety bonds of, 183 
Origin of coUeges and universi- 
ties, 2 



Pay-roU register, 99 
Physical plant 

Accounting for, 63 

Definition, 54 

Depreciation of, 56 

Insurable value, 56 

Inventory, 56 

Operation and maintenance, 
disbm-sements for, 20, 54 

Operation and Maintenance, 
Schedule XI, 163 

Pledges, treatment of endowment, 
51 

Premium, amortization of, 71, 73 
President of board of trustees, 
duties of, 178 

President of college 

Acting, 191 

Annual report of, 191 

Duties of, 191 
Purchasing, 93 

R 
Real estate 

Provision for depreciation of, 30 
Value placed on gifts of, 30 

Receipts 

From bookstore, 10 
From dining-halls, 10 



From dormitories, 10 

From gifts, 10, 15 

From income on endowment, 

10, 14 

From miscellaneous sources, 10 

From students, 10 

Relative distribution of, in 
private and public institu- 
tions, 1 

Sources of, 10 

Records 

Financial, 96 
Statistical, 102, 114 

Reports 

Contents of, 107 
Financial, 41, 92, 105 
For trustees, 115 
Treasurer's Annual, 119 

Requisitions, 83 

Reserves Account, Schedule X, 
162 

S 

Salaries, teachers', 4 

Salary check, 99 

Schedules 

I. Investment of Endow- 
ment Funds, 144 

11. Investment of Annuity 
Funds, 148 

III. Buildings, Grounds, and 
Equipment, 149 

IV. Temporary Investments 
of Building and Equip- 
ment Funds, 151 

V. Endowment Funds, 152 
VI. Annuities, 155 
VII. Building and Equipment 

Funds, 157 
VIII. Special Funds for Desig- 
nated Purposes, 158 
IX. General Funds for Desig- 
nated Purposes, 159 
X. Reserves, 162 
XI. Operation and Mainte- 
^ nance of Physical Plant, 

163 
Explanatory notes on, 167 



212 



INDEX 



School of Music 

Report of current operations, 
125 

Table VIII, 139 

Secretary, duties of, 180 

Securities 

Access to, 52, 179 
Annual audit of, 53 
Custody of, 52 

Smith College, 5 

Special Funds for Designated Pur- 
poses, Schedule VIII, 158 
Statements, explanatory, 113 
Statistical records, 102 
Statistical reports, 114, 116 

Statistics 

Explanatory, 113 

Graphic representation of, 104 

Strictly educational operation, 
meaning of (note), 11 

Student fees, 10 

Advance payment of, 13 
Budget estimate of income 
from, 70 

Students 

Receipts from, 10 

Share of cost of education, 10 

Subscriptions, treatment of en- 
dowment, 51 

Surplus and Deficit Account, 
Table II, 130 



Tables 
I. 
II. 
III. 



IV. 



T 

Balance Sheet, 128 

Surplus and Deficit, 130 

College of Liberal Arts — 

Income, 131 

College of Liberal Arts — 

Expense, 133 

College of Liberal Arts — 

Summary, 134 

College of Liberal Arts — 

Analysis of Income and 

Expense, 135 

Dormitories, 136 



VI. Dining-HaUs, 137 



VII. CoUege Bookstore, 138 
VIII. School of Music, 139 
IX. Heat, Light, Power, and 

Water, 140 
X. Gifts Paid in, 141 
Explanatory notes on, 164 

Taxes, source of income, 1 
Tax-supported institutions, refer- 
ence to, 6 
Treasiu-er 

Annual Report of, 119 

Duties of, 178 

Endowed College, 174 

Surety bond of, 179 
Trust funds, file of, 63 
Trust Laws, Wisconsin (Appen- 
dix), 194 

Trustees 

Powers of, 172 
Reports of, 41, 115 
ResponsibiHty of, 39, 51 

U 

University of California, 1 
Cambridge, 3 
Chicago, 5 
Illinois, 6 
Michigan, 6 
Minnesota, 6 
Oxford, 3 
Princeton, 4 
Virginia, 1 
Wisconsin, 6 

University of Wisconsin By-Laws 
of Regents (Appendix), 197 

V 
Vice-president, duties of, 178 
Voucher check, 98 
Voucher register, 98 

W 

Wisconsin Trust Laws (Appen- 
dix), 194 



Yale University, 5, 17 



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